21.02.2008

Terex Cranes up 28%

Terex crane has reported its full year 2007 results, they show that revenues increased by 28.5 percent, compared to last year, to a record $2.235 billion.

Gross profits improved by 53 percent to $448 million - over 20 percent of sales, up from 16.8 percent in 2006. Sales and General Admin costs rose to 8.6 percent of sales from eight percent last year, leaving an income from operations of $257 million, an increase of over 66 percent.

Order intake continued to outpace the crane divisions ability to produce, and grew by more than 77 percent to over $2 billion, more than a years production.

The results announcement no longer includes a statement from the president of each business, but a short commentary on the fourth quarter said:
“Strong global demand for large crawler cranes and mobile telescopic cranes continues at unprecedented levels. In the North American market, rough terrain cranes continue to be in high demand, while sales of boom trucks and smaller truck cranes were down as compared to the fourth quarter of 2006. Supplier constraints, particularly in Europe, and capacity limitations in terms of
welding and assembly space have extended delivery lead times. Operating margin improved due to a shift in mix to larger cranes, realisation of price increases and better factory utilisation.”

Terex Group Results

Overall Terex group revenues increased by 19.5 percent to $9.14 billion while pre-tax profits leapt by almost 50 percent to $919.3 million.
See Ron Defeo on CNBC
Terex chairman and chief executive officer, Ron Defeo said: “For Terex, 2007 was a very strong year in terms of financial performance, with our best sales quarter of the year coming in the fourth quarter. This was a transformational year for our Company, as it demonstrated that the changes made as part of the journey we embarked on a few years back are taking hold and working.”

“We achieved a full year operating margin of 10.5 percent, net sales grew 19.5 percent and income from continuing operations was up 55 percent. These achievements place us well ahead of the pace we communicated a year earlier in conjunction with our medium term financial goals, and yet the operating margin improvement is still below the potential that we think exists in the Company.”

“We achieved these goals while continuing to have certain product lines of the Company face challenging market conditions in their particular niche. We have benefited from strong global markets, as well as a relatively small exposure to the U.S. housing market; in fact non-U.S. net sales represented 70 percent of our total net sales for the full year 2007.”

“We continue to build a better and stronger operating company while
keeping honed the skills of a targeted acquirer of assets. The supply chain and component shortages we are facing continue, but we are making steady progress.”

“In 2008, we will build start-up factories in India and China and potentially other developing markets. In 2007 we successfully acquired Superior Highwall
Miners, and expect to close the acquisition of A.S.V., Inc. in the near future.”

Vertikal Comment

The results at Terex crane are of course exceptionally strong, particularly in terms of margin improvements and profitability. However when it comes to production levels it has clearly not managed to keep pace with the market growth as well as its main competitor.

To be fair some of this is likely to be down to the product mix, a much larger share of Terex’s sales are derived from mobile, particularly wheeled, cranes where component shortages remain an issue.

The recent appointment of Rick Nichols as president with his strong track record on production efficiencies, is almost certainly related to the need for Terex to increase crane production volumes if it is to maintain its market position and gain the most benefit from the current strong market.

In spite of this it is hard to knock a 66 percent increase in profits and a $2 billion order book.