31.05.2005

Terex Cranes up 45%, Genie 60% in first quarter

The Terex Corporation, parent of Terex Demag Cranes and Genie aerials has reported a 39 percent increase in group revenues for the first quarter 2005 to $1,449 million up from $1,044 million for the same period last year.

Net income rose by 78 percent to $30.3 million compared to $17.0 million in 2004. Net income excluding special items was $30.8 million.

Special items included the cost of the investigation into the group’s internal review and the restatement of its financial results for 2000, 2001, 2002, and 2003, and charges relating to the closure of certain Terex Utilities branches..

The group’s backlog at the end of the quarter was almost double last year’s level at $1.57 billion. Gross margins dropped by one percent from 15.3 to 14.3 percent while SG&A costs fell in percentage terms from 10.7 percent last year to 9.3 percent before the special items are accounted for.

“We continue to be encouraged by current trends and our solid performance in the first quarter. Although the first quarter still reflects an imbalance between our input costs and our pricing to our customers, we are confident that we are doing the right things to improve this situation,” commented Ronald M. DeFeo, Terex’s Chairman and Chief Executive Officer. “We have taken pricing initiatives that should be more evident in the second quarter, and clearly the demand for our products is strong.”

“We appreciate the patience our stakeholders have shown as we have diligently pursued historical intercompany imbalances and related issues. While the issues were deeper and more complex than we initially expected, we believe that we are nearing completion of our review. Although the ultimate outcome is not yet finalized, we continue to expect that the total impact to our 2003 stockholders’ equity value will be immaterial. We have learned a lot in this process that will make our company better and stronger in the future, and we are moving on implementing these improvements. In the meantime, business conditions remain strong.”

Terex Cranes

Terex Crane’s revenues for the first quarter increased by 43 percent to $299.5 million, compared to $209.2 million in 2004. While sales increased across all crane types, tower crane sales were quoted as particularly strong.

SG&A expenses within the crane group increased by over two million to $25.8 million but at 8.6 percent were significantly lower in percentage terms than last years 11.2 percent.

Operating income from crane operations fell by $100,000 to $6.3 million, 2.1 percent of sales, a full percentage point down on last years 3.1 percent. The company blamed the fall in profitability on the continuing weakness of the North American market for lattice boom cranes, the expiration of favorable long-term steel pricing contracts, principally for Terex Demag in Germany, and the impact of a five week strike at the company’s Waverly, Iowa facility.

“The Cranes segment continued to show strong revenue growth from its recent cyclical lows,” commented Steve Filipov, President – Terex Cranes. “Our first quarter deliveries were over 40 percent higher than the same quarter the prior year. This is even more impressive when you factor in the five week strike at our Waverly facility, negatively impacting our ability to ship our planned order book. With the strike behind us now, having signed a three year labour agreement with our union, we are focused on ramping our production back up and adding workers and a second shift to our Waverly, Iowa facility. The end result of these actions will be higher productivity in the factory and substantially more shipments of cranes with higher pricing versus 2004 levels.”

“We continue to see strong results from our tower crane business and our French operation, where we have a strong backlog. These companies should also continue to see margin expansion moving into the second quarter, as price increases taken in late 2004 are beginning to flow through production. Our crawler crane business, although showing modest signs of improvement, remains under pressure. As Terex moves further into 2005, that business should begin to show some positive trends as Asian demand is projected to remain strong and the potential exists for a few large crawler crane project orders.” Filipov continued,


Terex Aerials

Revenues for the Terex Aerial Work Platforms group, jumped by almost 60 percent to $295 million. The Aerial Platform group principally comprises Genie aerials, although the sector now also includes Terex light construction products and Load King trailers for the first time. In order to see a like for like comparison, Load King and Light construction results have been added to last years numbers.

Genies gross margins as a percentage of sales, dropped by over four points, although rising by over $11 million. Margins were negatively affected by cost increases on components, steel, energy and inbound freight charges; plus a delay in the positive impact of product price increases announced in late 2004, due to price protection on the group’s backlog that it carried over into 2005 shipments.

Income from operations increased to $27.7 million, from $21.8 million in 2004. The aerial groups back log has leapt to almost $500,000, an increase of over 500 percent on this time last year. This is reflected in the market place with many Genie aerial models being sold out into 2006.

“Our first quarter performance reflects many different pressures that we are experiencing in our business,” said Bob Wilkerson, President-Terex Aerial Work Platforms.

“Our first quarter sales were up 60 percent and our backlog is up 509 percent when compared to the first quarter of 2004, clearly highlighting the growing demand and applications for our products. However, cost pressures for our production components, namely steel, continue to weigh on our business, especially compared to the first quarter of 2004. Fortunately, we see these pressures stabilizing, and our pricing actions should begin to offset the cost increases and return our margins to their historic levels.”

“Our telehandler business posted year over year revenue increases in excess of 50 percent, and our light construction and trailer businesses also posted strong operating performances. Overall, the quarter highlights our current challenges, but our second quarter outlook is strong, with operating margins expected to be in the 12 percent range versus the 9.4 percent we generated this first quarter.” Wilkerson added,



Group Outlook

Ron DeFeo made the following statement regarding the management’s expectations for the year as a whole.

“We continue to be quite positive regarding our prospects for the 2005 fiscal year, our first quarter results illustrate the strong demand in the marketplace for Terex products, and revenues remain at or above the pace needed to achieve our Company goal of $6 billion in revenues in 2006. We remain committed to delivering margin improvement, both in the near term and throughout the balance of 2005 into 2006. This will be accomplished through continued focus on rationalizing our input costs with suppliers across the organization, as well as continued adjustments to our prices to better reflect the current cost environment.”

“Our recent performance validates our bullish view of our prospects for 2006 and beyond. With regard to full year 2005 expectations, we now anticipate earnings per share will be higher than anticipated at the beginning of the year and will be in the $3.50 to $3.70 range. In addition, it is important to remember that Terex is a diverse portfolio of businesses, and a substantial portion of our product categories are later cycle businesses that have just begun to positively contribute to our overall profitability. As we move further into the year, we believe that enhanced performance from these businesses, as well as our continued efforts to reduce our debt, will create an accelerator towards achieving our objectives and should provide a real boost in Terex’s overall operating performance for the next several years” DeFeo continued.

Financial Restatement

Terex has still not finalized its third quarter 2004, full year 2004 and first quarter 2005 results pending completion of its detailed internal accounting review, the restatement of Terex’s financial statements for the years ended December 31, 2000, 2001, 2002 and 2003, and the completion of its audited financial statements for 2004.

Terex says that it continues to work diligently to complete its restatement, audit and assessment of internal control over financial reporting and believes that it is nearing completion of this process. It expects to file all appropriate documents, including applicable financial statements, with the SEC in the near future.

Vertikal Comment

Terex crane and aerial sales continue to go well, benefiting from strong market growth, margins remain under pressure, as raw material and component costs continue to rise and the companies find it difficult to pass on the full impact of cost increases.

Compared to some competitors Terex crane and aerial companies have been less brutal with price increase application and have honoured long standing agreements and contracts.

While this has without doubt impacted its short term margins, its policies should provide some benefits when the market switches back in favour of buyers.