Profits jump at Terex Cranes
20. February 2013 | Comments (0)
The company reported revenues three percent lower at $1.49 billion, while operating profits surged more than five-fold to $143.4 million. The backlog/order book at the end of December was nine percent lower than at the end of 2011 at $482.2 million and five percent down on the quarter.
Looking at the fourth quarter sales were down nine percent on the same period last year at $394.9 million, with reduced demand in Western Europe, partially offset by strong demand in North America, Australia and the Middle East. Sales in the Middle East more than doubled in Turkey and Saudi Arabia. Operating profit during the quarter more than tripled to $45.7 million, due to higher prices, lower costs and more service revenue.
Terex Material Handling & Port Solutions saw revenues jump 71 percent to $1.84 billion, while turning last years loss of $64.7 million into a profit in 2012 of $134 million. However at this stage comparisons are not particularly meaningful. In the fourth quarter revenues slipped by almost 16 percent to $439.6 million, while the operating loss was slightly higher at $21.9 million, due to higher material costs, as well as $16 million in restructuring charges.
The Terex group as a whole saw full year revenues rise 12.5 percent to $7.3 billion, while pre-tax profits jumped almost 85 percent to $155.6 million.
Terex chief executive Ron Defeo said: We made significant progress in
2012. Our primary goals were margin improvement, cash generation and the integration of Demag Cranes. We made excellent advancement in these areas and more during the year. We were impacted in the second half of the year by challenging end markets in Europe and Asia but we still meaningfully improved our profitability, generated approximately $554 million of free cash flow, restructured and reduced our debt, and began to realize integration savings as planned.
We are optimistic about our business as we begin 2013. We are seeing improvements in many of our end-markets and believe the macro-economic uncertainty that affected our fourth quarter performance will abate by the middle of 2013. Three segments performed well in 2012 and we expect this to continue in 2013. Our Aerial Work Platforms (AWP) segment is continuing to benefit from North American rental channel demand.
Cranes performance is expected to remain strong in North America and in certain developing market regions. Cranes delivered double digit operating margin in the fourth quarter of 2012.
We have made good progress with the integration of our Materials Handling & Port Solutions segment. Full year 2012 EBITDA as adjusted for MHPS was approximately $101 million. Benefits are expected from cost synergies globally to help offset weak European markets. In 2013, we expect to exceed the originally targeted $35 million in annual savings and weak markets should stabilise later in the year. The benefits of the big port projects we have won are also expected to be seen in our results in the back half of 2013 and 2014.
While balancing the different demand environments in each of our businesses, we are expecting net sales in 2013 of between $7.9 billion and $8.3 billion and expect to generate more than $500 million in free cash flow, with an aim to further reduce outstanding indebtedness.
Over the past several years, we have been diversifying and repositioning our business portfolio to strengthen the competitiveness of our company. We have moved from what was predominantly a mining and construction equipment company to a more diverse provider of lifting and material handling solutions that serve numerous end markets where we have leadership positions. We have established a 2015 earnings per share goal of $5 from $10 billion in net sales and with a 15 percent return on invested capital. We believe these targets can be achieved through organic growth and operational improvements.
An interesting set of numbers from Terex Cranes, clearly the price increases have come through the system, just as some raw material costs have fallen and substantial restructuring efforts begin to yield results.
There are often dangers lurking below the surface when a company shows hugely higher profit levels on falling revenues. However in this case it is more likely to be a fortuitous coming together of several virtuous cycles that has produced the strong improvement.
The cranes business may also have benefited during the year by the moving of some products like reach stackers into the new Ports and industrial division?
The business looks to be well placed in terms of products, and market position to have a decent year in 2013, with stronger upside potential as it continues to launch new models and rationalise its product lines and production.