30.10.2014

Profits slip at Genie

Genie/Terex AWP has reported a challenging third quarter with profits falling in spite of higher revenues. The company is cutting headcount to restore margins.

Total revenues for the first nine months were $1.9 billion, a jump of almost 16 percent on the same period last year. Operating profits for the same period were up four percent to $264.1 million.

In the third quarter revenues were up over 12 percent, but in spite of this profits dropped from $80.7 million in 2013 to $68.4 million this year – a fall of 15 percent. The order book at the end of the quarter was almost half what it was at the half year point at just $214.2 million. The poor net result is blamed on negative exchange rate moves, higher costs and high start-up costs to build telehandlers in Oklahoma City. As a result of the profit slip 500 job are to go in order to help restore margins.

Terex as a whole reported year to date revenues of $5.52 billion an increase of almost five percent, while pre-tax profits increased almost 39 percent to $257.8 million.

Chief executive Ron Defeo said: “Our results for the third quarter were in line with the revised guidance communicated in mid-September. Our Cranes segment met our lowered expectations for the quarter as end markets remain challenged. However, despite continued market environment challenges, we are anticipating sequential improvement from Cranes in the fourth quarter. While our AWP business is performing well, we had planned for a stronger second half of 2014 than has materialized which has put pressure on margins. AWP profitability was further negatively affected by currency movements late in the quarter, primarily the Brazilian Real, higher commodity costs and continued manufacturing startup costs related to the production of telehandlers at our Oklahoma City facility. As a result, we removed approximately 500 team members from AWP in the third quarter, which will aid in the return to more normal mid-teens margins within the next 12 months.”

“Our MHPS segment had a strong improvement in profitability, excluding the reserve we booked related to the planned closure of a manufacturing facility and production relocation. We are taking this action to improve the efficiency of our manufacturing footprint.”

Vertikal Comment

The third quarter margin fall is something of a surprise, the business is clearly still doing well overall, but has clearly run into trouble on some of the business it has taken in Brazil - in terms of currency related issues, while the commodity costs is more interesting - it should also start to affect others, such as JLG, Skyjack and Haulotte but as Terex is the first of these to report, we have no comparative yet.

The ‘seemingly’ quick decision to axe 500 jobs, suggest the company might have concerns about next year, although it may just as well be related to the ongoing streamlining of its global production and other operations to incorporate long planned efficiency savings. Negative news is usually best consolidated.

More will be revealed in the conference call, but this sudden drop does not necessarily signal a sudden downturn in the market, although the order book shrinkage is a little worrying. The full year numbers will be tell the full story.