31.10.2016

Tough quarter for Terex Cranes

Terex Cranes has reported a slower third quarter than anticipated with lower sales and an operating loss.

Revenues for the first nine months are $947.5 million, over 18 percent down on the same period last year. The company also saw last year’s operating profit 35.8 million to a loss this year of $41.5 million.

Looking at the third quarter sales fell more 25 percent to $282.8 million with an operating loss of $12.1 million, compared to a profit in the third quarter of 2015 of $12.1 million. The backlog/order book at the end of the quarter was 21 percent lower than this time last year at $317 million.

The Terex group as a whole - for ongoing operaitons - reported total revenues for the nine months of $3.67 billion 10 percent down on this time last year. Pre-Tax profits fell over 77 percent to $38.3 million.

Chief executive John Garrison said: “Our Aerial Work Platforms and Materials Processing segments performed in line with expectations, while Cranes performance was negatively impacted by more challenging markets than we anticipated and operational factors. The global capital equipment market remains challenging. Aerial work platform equipment sales continued to soften globally, particularly in North America. The market for mobile cranes weakened further than planned in the third quarter, with the primary driver being the retrenchment in the oil and gas sector in North America and legislative changes to subsidies in the German wind energy industry. We are taking actions to improve the Cranes business including the recently announced leadership changes.”

“We are reviewing all aspects of our cost structure and have been taking actions throughout the entire company to reduce costs. These savings were critical to at least partially offsetting challenging conditions in our markets. We further tightened the focus of our portfolio with the sale of our German Compact Construction business, and are progressing toward the planned completion of the Material Handling and Port Services sale in early 2017. We are also moving forward with the evaluation and simplification of our manufacturing footprint. During 2016, we successfully moved our mobile crane production from Waverly, Iowa to Oklahoma City, Oklahoma. Our AWP segment is consolidating scissor manufacturing from three locations to two, and reducing its overall manufacturing footprint including its main campus in Redmond, Washington. It also closed its facility in Stockton, California, and recently announced plans to close its Waco, Texas facility, consolidating into Oklahoma City.”

“Given the market dynamics and the challenges we are facing in our Cranes segment, we expect our full year earnings to be $0.70 to $0.80 per share, excluding the restructuring and other unusual items and to generate free cash flow of $150 to $200 million.”

Vertikal Comment

These results are not entirely surprising given the change of leadership announcement so close to the results being announced. They do show how tough the market for some crane types is. Terex Cranes still has plenty of challenges on its hands with the closure of Waverly in the US and the rebuilding of the Demag mobile crane branding.

It has some very good models on the horizon though, and as part of a smaller more focused group could see fortunes begin to improve in the second half of 2017, ready for a decent year in 2018. Although there are still plenty of uncertainties in the markets, what with the volatile US elections and the effect of the UK referendum on the European Union.