29.07.2019

Sluggish first half for Genie

Genie – Terex AWP – has reported static first half revenue growth, along with lower margins.

Sales of Genie products now make up more than half of Terex group revenues, at $1.6 billion, marginally higher than in the same period last year, held back by the weak Euro translating into fewer dollars and slower overall growth than anticipated. The backlog at the end of June remained at last year’s levels of $746 million, while operating profits slipped 20 percent to $145.9 million, thanks to the exchange rate issues along with a weaker product mix in terms of margin levels.
Second quarter sales increased two percent to $870.4 million, while operating profits remained under pressure falling 22.5 percent to $86.3 million.

Genie president Matt Fearon said: “The overall global market for aerial work platforms remains healthy, and the North American utility market remains strong. We expect the second half of 2019 to be similar to the second half of 2018 from an overall revenue and operating margin perspective. We continue to see strong growth in China through increased adoption of our advanced products. We are excited about our long term growth prospects across the Asia Pacific region. The recent launch of the Genie Lift Connect telematics solution is going well — customers are starting to see how the actionable information that the Genie Lift Connect program provides can help them increase their rental return on invested capital.”

“The Terex Utilities team continues to execute well in a strong market and the new, state of the art manufacturing facility that we are building in Watertown, South Dakota, remains on schedule.”
Terex as a whole reported first half revenues of $2.44 billion, while pre-tax profits slipped just over 10 percent to $177.5, partly down to the issues facing Genie, along with higher interest costs.

No mention is made of the disposal of the Demag product line as a discontinued operation its results are not included in the Terex numbers. The sale to Tadano has been put back a month or so and is expected to clear this week or next now, other than that, Terex will continue to operate the Italian Rough Terrain and tower crane businesses, although its numbers are not highlighted in the results. Corporate revenues however were 2.5 percent higher at $133.8 million while the corporate operating loss was reduced to $25.7 million from $39.3 million, whether this includes the ongoing mobile crane business is not clear.
Terex group chief executive John Garrison said: “Terex continues to grow, with Foreign Exchange -neutral revenues up eight percent in the second quarter. Global demand for our leading products and services remained generally stable at a healthy level, and we continued to meet the needs of our diverse customer base.”

“We generated $168 million of free cash flow in the quarter. This strong cash generation performance reflects our global team’s continuing focus on improving working capital efficiency. Furthermore, we expect to complete the sale of Demag Mobile Cranes in the coming days, realising cash proceeds of approximately $125 million.”

“Our improving financial results, with adjusted operating margins greater than 10 percent and adjusted earnings per share increasing 23 percent demonstrate the impact of executing our Focus, Simplify and Execute to Win strategy.”

“Aerial Work Platforms grew in the second quarter, achieving global sales growth of five percent on an FX-neutral basis, including strong growth in Asia. Margin performance in the quarter was adversely impacted by the weak Euro, lower production volume to align inventory with global market demand, and product mix. Overall, we expect its financial performance in the second half of 2019 to be similar to the second half of 2018.”

“Based on our first half performance, and changes to the outlook for Aerial Work Platforms for the balance of 2019, including lower than previously expected sales growth and reduced production volume, adverse foreign exchange rates and product mix, we expect full year earnings per share to be between $3.40 to $3.80, excluding restructuring, transformation investments, and other unusual items, on net sales of approximately $4.6 billion. We reaffirm our full year free cash flow guidance of $165 million.”

Vertikal Comment

Given all the uncertainties the world is currently experiencing it is hardly surprising that sales growth is a little slower, having said that Genie is well placed to benefit, should the uncertainty start to lift, leading to ‘catch up’ orders. Terex will also be in a better place once the Demag deal is completed and the residual crane business begins to settle down.

2019 as a whole is likely to be something of a 'consolidation year' for Genie, which will be looking increasingly towards 2020 when production of several new products should starts to rachet up, particularly if confidence levels pick up.