30.10.2014

Terex Cranes sees some light

Terex Cranes, while reporting further declines in revenues and profit in the third quarter, finished the quarter with a larger order book than last year and suggested that business looks set to improve

Nine month revenues were $1.317 billion, down nine percent on the same period last year, while operating profits fell over 39 percent to $51.3 million.
Third quarter revenues fell almost eight percent to $419.7 million with profits slipping 25 percent to $21.8 million. The order book at the end of the quarter was $551.8 million up 13.7 percent on last year, although down on the quarter.

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

Terex Cranes has been on something of a downward trajectory for some time, during which it has been making a good number of changes to its products and operations. The company clearly has a more positive view of the future than it did three months ago, and going into the fourth quarter with a stronger order book than a year ago is helpful.

One key fact that may or may not be affecting the business concerns the sales success of its new products. The company has introduced a substantial number of radically different All Terrain and truck cranes as well as changing traditional capacity and model descriptives.

This is not an easy thing to ‘get away with’ in the conservative crane rental market. Oddly though when it comes to big crawler cranes, where it has long reigned supreme, it chose to remain with a traditional approach just when traditional crawler crane manufacturer Manitowoc went radical - and seems to have made a go of it.

It is more than possible that many of Terex’s more radical moves are the right ones for the long term. The easy roading of its small to mid-sized All Terrains while fully equipped, makes complete sense and the efficiencies gained in a crane’s structure by not building it to handle the totally impractical nominal capacity also makes logical sense. The challenge though is getting this message over to buyers that are more often led by their hearts and tradition.

Not impossible, but it takes a lot longer and the road can be a little scary.
But as Liebherr has shown in the past, those who were there first and persist, take the long term gains.

Watch this space...