20.10.2015

Another tough quarter for Terex Cranes

Terex Cranes has reported slightly lower third quarter revenues with a steep fall in profits for the period.

Total revenues for the nine months were $1.26 billion four percent down on the same period last year, while operating profits fell almost 25 percent to $38.6 million. In the third quarter revenues were down just under two percent to $411.7 million, but operating profits plunged 43 percent to $12.4 million. Backlog at the end of September was $427.1 million 23 percent lower than a year ago.

Terex as a whole reported year to date revenues of $4.96 billion down almost 10 percent on last year, while pre-tax profits fell 20 percent to $206.3 million. Net debt increased from 1.31 billion to $1.6 billion.

Terex chief executive Ron DeFeo said: “Our marketplace remains challenging. We had another good performance in our Aerial Work Platforms business which delivered year over year improvement in profitability in the third quarter as increased productivity and lower material cost more than offset lower sales, mainly in the North American telehandler product category”.

“The Cranes and Construction businesses continue to experience relatively soft market conditions overall, with customers remaining cautious with their equipment purchasing patterns. The Material Handling and Port Solutions business saw declines driven by a decrease in port automation sales.”

“As mentioned last quarter, we are seeing pricing pressure in the marketplace, which to date we have been able to mostly offset by reductions in material input costs. We continue to execute very well against the cost saving initiatives that we have previously communicated. We also continue to make progress towards the completion of the merger with Konecranes Plc, which when combined with the improvements already underway creates a compelling financial improvement story in an otherwise flat market.”

“Given where we are in the year and the challenging environment we are operating in, we believe we will be at or near the low end of our previously announced earnings guidance for the full year 2015.”

Vertikal Comment

Given the sticky state of the crane market in areas where Terex is traditionally strong the revenues appear to be reasonable, and possibly stabilising. It is hard to know what caused such a sharp fall in profits, although it is probably product mix and exchange rate related. We will learn more later today during the conference call.

While not good, the results are a little better than we expected and encouraging in many ways, the overall market is likely to pick up again in the new year, although the depressed oil price will have keep crane sales to this sector soft, offsetting some of the likely gains in crane rental and to the construction sector. 2016 out to see a little more stability.