12.02.2009

Terex Cranes up 29%

Terex Cranes has posted a 29 percent increase in revenues for the full year 2008 to $2.89 billion, while operating income jumped 56 percent to $401 million.

The divisions order book slipped four percent compared to the end of December 2007, but remained flat over the quarter at $1.93 billion, However the company did see a large portion of its $648 million worth of ‘unbooked forward orders cancelled during the period. The backlog was also affected by a significant softening in tower crane orders.

Revenues in fourth quarter increased 10 percent to $729.4 million compared to the same period in 2007. Excluding the effect of exchange rate changes, sales were up approximately 18 percent.

Favorable pricing and sales volume for high capacity cranes, including crawler cranes, all terrain cranes and rough terrain cranes, more than offset continued softness in boom trucks and highway truck cranes and recent softening in tower cranes.

Fourth quarter operating income increased over 20 percent to $100.9 million, primarily due to the increased volume, favorable pricing and product mix.

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

This is a spectacular result from Terex Cranes, and highlights the fact that large crawler cranes and All Terrains are a large part of its business. The company’s small and self erecting tower crane, boom truck and small truck crane business, have never been big contributors to Terex.

These sectors are so far the worse affected in the crane market, and are having a greater impact on Manitowoc than Terex, or for that matter Liebherr. If the financial crisis continues at this level, the other crane sectors will eventually be affected. Although if there is any seriousness to the infrastructure spending plans on both sides of the Atlantic come to fruition, it will boost demand for these products.

While the company’s order book has seemingly remained buoyant, in reality it has dropped significantly in the USA where the company was wise not to have booked all of the forward orders from its dealers, preferring to put them into a holding pattern and release them into the official order book on a quarterly basis. This needs to be taken into consideration when making any comparisons with Manitowoc.

Terex will be looking to the crane business to compensate for the fall off in its construction and AWP divisions this year. The business could well deliver.