25.07.2013

Terex Cranes sales flat as profits dip

Terex Cranes has reported its first half results with revenues edging upwards while profits slipped.

Total revenue for the six months was $992.1 million, up just over three percent on last year, but operating income for the same period slipped almost 11 percent to $55.9 million. The backlog at the end of June was down 29 percent to $581.2 million, and eight percent down on the start of the year.

Looking at the second quarter, revenues were also up three percent to $521 million, but operating income more than halved dropping from 49.6 million in the second quarter 2012 to $23.4 million this year. Much of this was down to restructuring costs, particularly in relation to the German production operation.

The Terex group as a whole reported six month revenues five percent lower for the first half at $3.63 billion, with pre-tax profits dropping 47 percent, due to challenges in some of its business and charges for restructuring previously announced.

The company has also announced the purchase of a further 14 percent of the shares of Terex Material Handling & Port Solutions AG (Demag Cranes AG) and now owns over 95 percent of the company. It has initiated a ‘squeeze-out’ process that will lead to its owning 100 percent of the business.

Chief executive Ron Defeo said: “As we communicated in mid-June, the marketplace overall has softened compared to what we originally anticipated for 2013. The second quarter results reflect this lighter order environment overall, as our Cranes, Construction and Material Handling & Port Solutions (MHPS) segments all experienced lower revenues than originally expected. However, we do continue to see strong performance from our Aerial Work Platforms (AWP) business, and good operational execution by our Materials Processing business in a challenging environment."

"Overall by geography, North America continues to improve, but now at a slower pace. Europe remains challenging, particularly for our Cranes, Construction and MHPS segments, and the markets in the rest of the world remain mixed.”

“As a result, and as previously previewed, we took substantive actions in the second quarter to further adjust the cost structure of the MHPS, Cranes and Construction organisations. While these actions are difficult, the benefits to our stakeholders are expected to have a meaningful impact on our future results, particularly in 2014 and beyond. We expect stronger MHPS performance in the second half of 2013 as we begin to deliver increased revenue from their large backlog. These actions provide us with confidence in the near-term execution of our revised plan, and are necessary as we pursue our longer term goals.”

“Terex remains focused on improving profit through continued vigilance on pricing and operating costs. We are working to more thoroughly integrate our businesses and consistently generate free cash flow. We reiterate our earnings per share outlook of 2013 to be between $1.90 and $2.10 per share, excluding restructuring and other unusual items, on net sales of between $7.5 billion and $7.7 billion.”

Vertikal Comment

These results are not quite as gloomy as they at first appear, although the softening in order intake that has led to a drop in the company’s backlog is worrying of course. However assuming that it gets its German restructuring right the business could be in solid shape to benefit from what is still a solid market with plenty of upside and Terex is well placed within it.

This will clearly not be a great year for Terex Cranes but it should be ready to kick up a gear in 2014.