23.10.2008

Terex cranes up 37%

Revenues at Terex Cranes jumped by 37 percent for the nine months to the end of September to a record $2.16 billion.

Gross margins during the period improved from 19.9 percent of sales to 21.9 percent. Operating income for the nine months was up by 73 percent to over $300 million.

The upward trend continued in the third quarter with similar levels of revenue growth, although gross margins slipped back slightly as a percentage of sales to just under 21 percent. The third quarter also included a $15 million charge for a crane recall programme.

The declared crane order book at the end of September was $1.9 billion, compared to $1.7 billion last year and just over $2 billion at the end of June, however the non-booked crane orders, mostly in North America, (Terex takes bookings from dealers but does not price or officially book the orders until closer to the projected production time) have grown from $485 million to $648 million at the end of September

Terex says that demand remains strong for larger capacity cranes, particularly larger lattice boom crawler cranes, tower cranes and rough terrain cranes, driven by global infrastructure and energy projects. However it has seen a softening of demand for boom trucks and smaller truck cranes.

European crane component shortages have improved, as have welding and assembly capacity constraints allowing the ramping up of production. The company says that while demand is expected to remain strong for the foreseeable future, the uncertain outlook for the global economy is causing it to review its expansion plans.

Terex Group

Total sales for the first nine months at Terex increased by almost 20 percent to $7.8 billion, while the third quarter increased by 14.5 percent. However if acquisitions and currency factors are removed, the year on year change is six percent. This is due to a strong performance in both the Cranes and Materials Processing & Mining.

Pre tax profits for the nine months were up more than eight percent to $738 million, however the third quarter saw pre tax profits fall by 40 percent to $139 million. This was due to the poor performances in AWP and construction, but also due to restructuring costs and a $15 million charge for a crane recall programme.

Ron DeFeo, Terex chairman and chief executive said: “While we continue to make progress on our improvement initiatives, the current environment is challenging, marked by a continued global credit crisis and worsening economic conditions, particularly in the U.S. and Western Europe.”

“Input costs continue to present challenges for us, although we expect these to moderate over time. At this time, our price increases have not yet fully offset our total material cost increases. We are taking aggressive actions to better position the Company for the expected reduced net sales levels of the next twelve months, in particular in the AWP, Construction and Materials Processing businesses.”

“At the same time, we are continuing to invest in developing markets and our improvement initiatives, as well as increasing Crane and Mining capabilities to meet the growing demand in those areas.”

“We expect 2009 net sales, including the effect of announced acquisitions, to be similar to 2008, driven by continued strong results in Cranes and Mining, offset by lower net sales in AWP, Materials Processing and Construction.”

Vertikal Comment

An excellent set of results from the Terex crane business, not only in terms of revenue growth but particularly in terms of profitability at a time when raw material costs were rising rapidly.

Next year's revenues will be boosted further by the Fantuzzi acquisition, which will take the crane division well up over $3 billion in revenues. The key challenge for Terex will be to keep all of its crane production capacity busy as demand for some crane models will be very strong while other sectors continue to slow down.