30.10.2005

Terex group sales up 31%

Terex has announced group sales for the nine months to the end of September, of $4.7 billion, up 31% on the same period last year. Net income was $163 million, an increase of 25%.

"Overall, Terex had a strong third quarter," said Ronald M. DeFeo, Terex's chairman and chief executive officer. "We are pleased with our operational and financial performance, which reflects continued positive end-market trends for many of our products and builds on the operational improvements we have undertaken to date. We are seeing more meaningful signs that the struggling businesses in our portfolio are in the early stages of recovery, while at the same time our stronger businesses continue to post even better results than originally anticipated. We also saw a meaningful improvement in operating margins resulting from improved pricing and growth leverage."

"We continue to operate in a challenging environment. We view these challenges as opportunities to deliver even stronger results in the future," added DeFeo. "Supplier issues, most notably, but not exclusively, steel and tires, resulted in cost pressures and shortages impacting several of our products. Couple these issues with the overtime needed to meet customer demand, and we have good but difficult problems to solve. These reinforce the importance of all the work we are doing as part of the Terex Business System to bring Terex together. As I have indicated before, we are still in the early stages of these initiatives."

Cranes up 23 percent

Crane sales Year to date rose by 23 percent to $930 million, not far off last years full year revenues. Gross margins for the third quarter, rose to 12.7 percent of sales, from 12.1 percent at the same time in 2004.

Sales in the third quarter improved at a slower pace than the first half, growing by eight percent, to just under $290 million.

The crane order book climbed by almost 60 percent, compared with the same time last year to $285, suggesting that the quarters slower pace of growth is linked to production limitations rather than order intake. Operating income for the quarter jumped 60 percent to $12.6 million.

"As in the first half of this year, our global presence continues to help balance our performance in the third quarter," commented Steve Filipov, president - Terex Cranes. "The North American market, however, has shown signs of demand improvement. The backlog is strong, and the order book continues to grow. We now need to increase our production rate. We have a new leadership team in place that is firmly focused on lean implementation, better purchasing and customer service.

Additionally, the Waverly, Iowa team initiated an additional price increase of roughly 5 percent to help offset cost pressures. We continue to see improvements in our other product ranges, including the tower crane business, and an improving all-terrain crane global market."

"What has turned out to be a real success for Terex is our under-300-ton lattice boom crane relationship with IHI. This month, Terex will be delivering the 300th crawler crane sold under this relationship. This product, combined with our 300-ton and up range out of Germany, has made Terex one of the market leaders in this category. The small range of crawler lattice-boom cranes has continued to grow in market penetration in North America, and positions out product well for the recovering crane economy" Continued Filipov.

Genie/Aerials surge by 55 percent

Terex Aerial lift sales, (largely Genie), for the nine months rose by almost 55 percent to $1.04 billion. With the growth trend edging higher in the third quarter. Operating income climbed by over 65 percent to almost $50 million, over 13 percent of sales. The company’s order book strengthened by over 70 percent to over $203 million Gross margins improved in the final quarter to 20.5 percent of sales.

"During the third quarter, we continued to see strong demand for all our products," said Bob Wilkerson, Terex executive vice president and president of Terex Aerial Work Platforms. "Demand on a worldwide basis remained strong, with particular strength in Asia and the Americas. Additionally, we saw an increase in order activity for many of our products due to Hurricane Katrina, but this increase was mainly due to the replacement of lost or damaged equipment already in the region, and does not reflect the reconstruction needs that will undoubtedly materialize."
Wilkerson added.

"We are full of optimism as we look forward into 2006, and we expect our favorable performance trend to continue. We continue to tackle the challenges that emerge from input pricing and supply concerns, but feel we are doing reasonably well in managing these items. The management team remains focused and will continue to work to ensure that input costs and sales prices are closely linked. Our optimism is strong, and the demand for our products is solid today and is still improving.”

“It is important to remember that approximately 65 percent of our business is North American focused, and the largest driver of this business is commercial construction. With commercial construction in the U.S. only recently recovering, and a consensus view of a multi-year projected favorable outlook for commercial construction in the U.S., we remain optimistic that revenues and operating profit will continue to improve."

Terex Group debt

"Net debt increased quarter on quarter as a result of the growth in revenues demanding higher seasonal working capital. but dropped (improved) by $61 million or 7.5 percent to $763 million year on year.

”We have said that our expectations are for cash flow to closely follow the seasonal pattern of the business. With a stronger third quarter than originally anticipated, much of the anticipated cash flow has been reinvested in working capital to supply current product demand, and as such, it has deferred much of the cash benefit into the fourth quarter. Working capital as a percent of trailing three month annualized sales was approximately 21% at the end of both the third quarter of 2005 and 2004. However, our goal is still to achieve an 18% level at the end of 2005." Said Phil Widman, Terex's senior vice president and chief financial officer.

Vertikal Comment

Terex continues to improve its performance and financial position as it moves to its new strategy of building its brands. After a period of slipping margins, as the groups operating companies failed to capture the full cost of rapidly rising raw material prices. A combination of price increases and manufacturing improvements is yielding improving margins.

The aerial lift division is on stream to turn in revenues of over $1.3 billion, with an operating profit approaching 12.5 percent. Overtaking the crane group which is likely to see revenues in the region of $1.2 billion with an operating income of around four percent.