12.02.2009

Terex AWP/Genie down 12%

Terex AWP/Genie has reported full year 2008 revenues down just under 12 percent to $2.1 billion, while profits declined 46 percent to $246 million due to a poor fourth quarter.

During the fourth quarter revenues dropped 48.6 percent compared to the same period in 2007, to $301.3 million. At constant exchange rates the net sales drop off was 45 percent.

Fourth quarter sales in North America were down 46 percent while Europe, Middle East and Africa declined 60 percent, with weaker demand across all product lines.

The division’s operating loss during the fourth quarter was $6.8 million compared to an operating profit of $94.6 million in the fourth quarter 2007. The decrease in profitability was driven by significantly lower sales volume, higher material costs and costs associated with restructuring and reductions to production levels.

Genie’s order book at the end of December 2008 was 87.3 percent lower than at the same point in 2007, and fell 67.7 percent over the fourth quarter.

Terex Group

The Terex group as a whole saw revenues rise by 8.5 percent to $9.89 billion but pre tax profits plunged 66 percent to $314 million. During the fourth quarter revenues dropped 20 percent while the group posted a pre tax loss of $$424 million compared to a pre tax profit of $174 million in 2007.

Group backlog was $2.96 billion at the end of December, a decrease of 29.3 percent on 2007 and 18.5 percent lower than at the start of the fourth quarter.

Ron DeFeo, Terex chairman and chief executive officer, said: “This past year has been like no other – the first half of the year exhibited robust growth and expansion, while the second half of the year was severely impacted by the global credit crisis and economic deterioration, which drove significant declines in customer demand in our businesses.”

“For the full year, net sales increased significantly in our Cranes and Mining businesses, but were offset by the results in our Aerial Work Platforms, Construction, and Materials Processing businesses, which experienced considerable weakness in the second half of the year. Excluding the goodwill impairment charges, our net income for the year was good given the economic environment."

"Although we are disappointed with our current working capital levels, we have taken aggressive actions to adjust our production to meet reduced customer demand. We maintained a strong cash position and ended the year with a solid balance sheet and sufficient liquidity to execute our key business plans.”

“Given the current market conditions, it is difficult to project 2009 performance
with a reasonable degree of certainty. However, we are planning for continued softness in demand. We are experiencing increasing levels of cancellations in our backlog for crane and mining products, as well as delays in acceptance of deliveries, as our customers in these areas are not immune to the effects of the global economic downturn.”

“Based on what we know today, we expect our net sales for 2009 to decline by 30 to 35 percent from 2008. The translation effect of foreign currency exchange rate changes is expected to contribute approximately 13 percent of this decline. Given the uncertainty and volatility in today’s environment, we are not providing earnings guidance until we have better visibility; however, we will continue to take aggressive actions to reduce operating costs and improve our cash flow.”

Vertikal Comment

These numbers from Genie are no surprise, there can be no one who is unaware of how bad the fourth quarter 2008 was. What is indicative is how reasonable the year as a whole was, highlighting how good the first part of the year was.

Sales revenues in the fourth quarter have plunged to quarterly levels not seen since 2005. The challenge will be to restructure costs back to that time, without destroying the company’s potential to bounce back when thing begin to pick up.

2005 was not a great year for Genie, but it now carries a much larger overhead and management structure than it did back then, but it also has a much larger population feeding in highly profitable replacement parts and service income.

The challenge is to restructure quickly and in the manner best suited for the business, while keeping key team members on board and motivated, ready for the pick up which will come next year.

The next 18 months are likely to change the order of the big three manufacturer’s possibly propelling one of them ahead of the others. All three have shareholders to report to, so from that aspect it is a level playing field that’s where the similarities end.