22.10.2009

Genie reports stable quarter

Terex AWP /Genie has reported its third quarter results which show revenues similar to each of the first two quarters at $200 million down 66 percent on the same quarter last year. At the same time its backlog nudged upwards.

Year to date revenues are $639 million down 68 percent million on last year The company’s backlog at the end of September was $140 million, down 61 percent on September 2008, but most importantly up 1.4 percent on the end of June.

The company posted a year to date operating loss $124 million, compared to a profit of $264 last year. For the quarter the loss was $50 million compared to a profit of $24.2 million in 2008.

The company statement says that the result was negatively affected by $18 million of restructuring costs and $10 million for a field repair programme, a supplier credit exposure and the termination of a distributor.

It adds though that the backlog reflects “some stability returned to the AWP markets on a sequential basis, although at reduced levels. Due to continuing economic uncertainty, customers are ordering equipment when needed.”

Terex as a whole reported year to date revenues down 51 percent to $3.8 billion, and a pre tax loss of $333.9 million compared to a profit for the same period last year of $741 million.

Third quarter revenues were down by a similar level to $1.23 million, while pre tax losses were $127 million, compared with a profit of $139 million for the third quarter 2008.

Terex chief executive Ron DeFeo said: “This was a disappointing quarter but we feel that we are turning the corner to better performance. We have built a company that is both geographically and product diverse, but virtually no part of our business has weathered these market conditions unscathed. Fortunately, we see signs that certain markets have stabilised, and even a few signs that point to growth.”

“We are continuing to aggressively reduce costs as our business will be roughly half the size in terms of net sales than it was in 2008. Manufacturing spending in the third quarter of 2009 was down 52 percent from the peak spending levels during the second quarter of 2008 and seven percent sequentially from the second quarter of 2009."

"When combined with further reductions of “SG&A” costs, these actions resulted in a $265 million quarterly run rate spending reduction in the third quarter of 2009 versus spending levels in the second quarter of 2008. We continue to target a $300 million quarterly run-rate reduction by year end.”

“We added the Fantuzzi and Noell businesses this quarter, and going forward this will be known as Terex Port Equipment within our Cranes segment. In the short term, we expect the results of this business to reflect the globally challenging environment for marine trade. Consequently, we have implemented aggressive restructuring activities. Longer term, we expect that this will be a great business, with a leading position in the global port equipment industry.”

“We are at an inflection point in this business cycle and I believe it is now time to focus on growth while continuing to hold the line on costs,” added Mr. DeFeo. “We have obviously taken a defensive posture to preserve the enterprise during this period of incredible economic uncertainty, but we believe progress can be made from here going forward. We recently held a North American dealer
and customer event, and what we heard reinforces our views that the current business environment has stabilised and optimism is beginning to build for 2010 and 2011.”

Vertikal Comment

There are no surprises in these results, but they are encouraging in that it is the third quarter in a row without significant revenue declines. It is also significant in that the order book has improved slightly.

While a 1.4 percent can hardly be called significant, the fact that it has not declined is positive in itself and is the first time in at least a year that this has happened. Terex is continuing to rationalise its cost structure and gain benefit from rationalising the many facilities that it has among its different businesses.

Doing this while retaining the unique and entrepreneurial culture that it acquired with Genie is a tough job and at times it has appeared to have ‘lost the plot’.
However each time this has occurred and it looks set to enter a downward spiral, it bounces back and continues on its way.

We are probably at a point now where the four big players in the self propelled aerial lift market need to be looking at their strategies for making the most of the upturn, that while it will be slow coming, will certainly be gathering some steam by this time next year.

In the meantime Terex is more than holding its own in this difficult market.