22.10.2009

Terex Cranes holds on

Terex Cranes has reported third quarter revenues of $453 million, down 38 percent on 2008, while operating profits were $12 million down from $85 million in the same quarter last year.

Year to date revenues were $1.4 billion, 36 percent lower than for the first nine months of last year. Nine month operating profits were $57.5 million, compared to $296 million for 2008.

The company said: “Net sales of Rough Terrain and tower cranes remained significantly below levels achieved during the third quarter of 2008, as global commercial construction continues to slow and oil-related energy demand for Rough Terrain cranes remains soft.”

“Sales of lower capacity All-Terrain cranes have also weakened, although demand continues for high capacity crawler and All-Terrain cranes for global infrastructure and energy related projects such as wind power and power plant construction."

The crane order book slipped 48 percent year-on-year and fell 4.4 percent since the end of June. However the order book now includes the Fantuzzi port business, without its contribution the backlog would have been down 59 percent compared to September 2008.

Terex adds: “Tower crane and rough terrain crane demand is down substantially from levels of one year ago, driving the majority of the decrease in backlog. While order intake for smaller crawler cranes and All Terrains is softening.”

Terex Group

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 selling,
general and administrative expenses (“SG&A”), 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

This is not a bad result at all and reflects the fact that Terex Cranes product strengths are working out well during this slow down. The company has lagged its two big competitors when it comes to tower crane sales, something that it probably appreciates now.

At the same time its Demag unit has built on its exceptionally strong position in big crawler cranes, a market that remains strong. The same is true of the large All Terrain market where it is also a significant player. In recent years the company had been spending most of its development funds in both of these areas, something that now looks link an inspired strategy.

Conversely the dramatic fall in RT sales in the USA has certainly hit Terex hard, but given that this is the largest sector of the North American crane market, there is not a great deal that can be done about this, apart from riding with the economic cycles with as much cost flexibility as possible.

The interesting thing is that having flagged behind the Genie AWP business in terms of profitability and revenue growth, during the 2006-2008 period, the tables have turned and it is now the one leading and contributing to the group.