19.02.2004

Terex announces 39 per cent revenue increase

Terex Corp, the parent company of Demag Cranes and Genie aerial platforms has posted a 39 per cent revenue increase for full-year 2003 and a net loss for the year of $25 million. This compares with a loss of $132 million reported in 2002.

Other highlights include a substantial improvement in free cash flow resulting in a $315 million reduction in debt for the year.

In the first full-year with the Demag and Genie acquisitions under its belt, Terex has posted a strong overall performance, which has seen it move close to market leadership in the crane business. With revenues of $1 billion dollars, it is right on the heals of market leader Manitowoc in terms of revenues, and is now the largest producer of aerial lifts in terms of revenue.

Total Terex group sales for the full-year were $3.9 billion, a rise of 39 per cent from $2.8 billion in 2002. Much of the increase is due to the acquisitions of Demag and Genie completed during 2002.

Revenues without the acquisitions remained virtually flat, rising three per cent to $2.4 billion. Gross margins after allowing for special items rose by 0.5 per cent to 13.3 per cent, while before special items fell by a similar amount from 15.3 per cent to 14.7 per cent. Sales, General and admin (SG&A) rose by $105 million but remained at around 10 per cent of sales. Most of the increase in SG&A costs came with the acquisitions. SG&A before acquisitions rose by $20 million.

Net reported loss reported was $25 million a significant improvement on last year’s loss of $132 million.
Net Income before special items was $71 million up 61 percent from last years $44 million.

Group order backlog as a percent of sales slipped slightly, to six weeks from seven and a half last year.

As mentioned above cash generation was the strong point of this years numbers, the company generated $384 million in free cash flow, allowing them to pay down $315 million of debt, this early retirement of debt did though generate penalties which are a component of the special items in this years accounts.

"Overall, 2003 was a respectable year for Terex in light of market conditions. We operated the Company throughout the year with an unwavering focus on cash generation and reducing working capital investment in our business," commented Ronald M. DeFeo, Terex's Chairman and Chief Executive Officer. "In the fourth quarter, we generated approximately $169 million in cash flow from operations and reduced net debt by approximately $159 million. We exceeded our 2003 goals for cash from operations and debt reduction, generating approximately $384 million from operations and reducing our net debt by approximately $315 million, or 26%, to approximately $894 million at year-end. Terex's balance sheet is in the best financial shape in our Company's history."

Cranes:
The Terex Cranes Group business is now centred around Demag, acquired in August 2002. . Crane sales for the full year were up 45 percent to just over a billion dollars, reflecting the full year effect of the Demag acquisition. Sales in the fourth quarter of 2003 actually fell by $7 million, but only due to the disposal of Crane & Machinery and Schaeff during the final quarter. Steve Filipov, President of the Crane group stated that Demag had a record month in December achieving the highest sales ever in the company’s history.

Gross margins for the full year rose in dollar terms but fell to 11.8 percent of sales from 12.8 percent last year. For the final quarter of 2003 though they jumped by almost two and a half percent.
SGA climbed to 85 million from 50 million in 02, a large portion due to the full year effect of Demag but SG&A costs also leapt by 20 percent in the fourth quarter, reportedly due to the fact that much of the cost base is now in Euros or Sterling which translates into a more dollars than for the same period last year.

With the drop in Margins and the rise in SGA, operating profits fell as a percentage of sales to 3.3 percent from 5.6 percent in 2002. But for the fourth quarter they actually improved in real and percentage terms. Margins for the year have, the company claim, been affected by slow sales in North America and lower margins on sales of European built All Terrain cranes into the USA due to the falling dollar against the Euro.

The outlook for the crane division in revenue terms is less positive than other parts of the business, Terex state that they expect to see sales drop to between $850 and $950 million with operating profits for the full year firming to four to five percent. Much of the fall is down to the disposals mentioned above, sales of cranes in North America is expected to be flat, while Demag expect to see further improvements in European market share thanks to a number of new product launches at Bauma.

Steve Filipov, President - Terex Cranes said, "I am pleased with the growing strength of the Terex Crane franchise. Demag closed December with a record month - the highest revenues ever achieved in its history. Our all-terrain crane product line continued to gain market share in the largest market, Western Europe. However, the crawler crane product line continues to be challenging due to the difficult North American market." Mr. Filipov continued, "We closed the Peiner production facility in Trier, Germany in the fourth quarter and have started production of Peiner Tower Cranes in our Demag facility in Zweibrucken, Germany. We would expect to see the financial benefits of this move in 2004."

Aerial lifts.
Terex aerials, which essentially comprise Genie Holdings Inc and the Terex Telehandler business, saw revenues rise to $583 million up by almost 300%, due of course to comparing one quarter against four. The fourth quarter though is a like for like comparison and here sales rose by 30 percent thanks largely to North American rental companies beginning to carry out fleet replacements. SGA in increased in real terms but fell as a percentage of sales to 13.0 percent. Operating profit rose to $68.6 million a very healthy 11.8 percent of revenues.

The pure aerial revenues of the business were over $500 million making Genie the largest producer of aerial work platforms in the world, beating JLG into second place.

Backlog as of the end of December was $22 million, significantly up on the same period last year but barely two weeks of orders,

2004 Outlook: Terex state that they expect 2004 to continue to improve, with sales of aerial lifts expecting to reach around $600 to $700 million with operating income firming to 11 to 12%. The weak dollar will certainly help increase the margins made on export sales. While the North American market is already showing signs of a strong upturn.

"We are pleased with our fourth quarter performance," commented Bob Wilkerson, President - Terex Aerial Work Platforms. "Our rental customers are more optimistic based on improved utilization/rental rates in their markets, and our volume increase over the prior year in what is normally our seasonally depressed period appears to be indicative of the projected capital spending of our rental customers for 2004, which is expected to be a significant increase over 2003 levels."
Mr. Wilkerson added, "The past year was also a year of operational focus, as our cost reduction and cash orientation continued to improve through the year. We look forward to integrating the North American sales for Terex's Compact Equipment line with our Genie sales team, so that we can serve the rental channel with a broader product offering, as well as sharing best practices in manufacturing and customer service within the Terex family."