30.04.2015

Bleak start for Genie

Terex AWP/Genie saw first quarter revenues fall by almost 14 percent as profits were almost halved, thanks to challenges largely outside of its control.

Total revenues for the quarter were $507.2 million, almost 14 percent lower than in the same quarter last year. Operating income in the period dropped from $82.2 million last year to 43.3 million this year. However the order book at the end of the quarter was up almost 34 percent to $699 million.

Much of the negativity was due to problems at the west coast American ports, restricting imports of components and exports of finished machines. However this issue was compounded by severe weather conditions in some parts of the U.S. and unfavourable exchange rates, all topped by an unfavourable product mix with fewer high margin boom shipments and more telehandlers, which are generally a lower margin product.

The company expects to bounce back in the second quarter thanks to its strong backlog and resolution of many of the negative issues from the first quarter. The company is not changing its estimate for the full year.

Terex as a whole saw revenues fall by almost 10 percent to $1.496 billion, while pre-tax profits for continuing operations fell from $43 million to $10.1 million. The net result was a loss of $2.1 million.

Terex chief executive Ron DeFeo said: “Operationally the first quarter was generally in-line with our expectations in most of our businesses, and we are encouraged by our order and backlog trends. However, our overall results were weighed down by lower margins in our AWP segment and an unusually high tax rate. Labour issues at the West Coast ports, severe weather conditions in some regions in the U.S. and uncertainty surrounding oil and gas caused our AWP segment to have a slow start to the year. Currency exchange rates, an unfavourable product mix of fewer booms and more telehandlers, and higher factory production rates in the prior year first quarter, also negatively impacted the year over year margin comparison".

"Importantly, our AWP segment exited the first quarter with a meaningfully higher operating margin run rate than its overall margins for the quarter. This, coupled with a strong backlog gives us confidence that AWP will return to more normalised operating margins in the second quarter.”

“The company’s overall outlook for 2015 has not changed. We expect strong performance from our AWP segment and improvement from our other segments throughout the remainder of 2015. We reiterate our annual outlook for earnings per share of between $2.00 and $2.30, excluding restructuring and other unusual items, on net sales of between $6.2 billion and $6.6 billion.”

Vertikal Comment

It looks as though Genie faced a ‘perfect storm’ in the first quarter with anything that could go wrong, going wrong. However the market as a whole is still reasonable and with a solid backlog to kick off the second quarter it ought to make a strong recovery by mid-year. Although the weak Euro will of course continue to reduce dollar receipts.

There is not much else to say at this stage. Although it is worth noting that the challenges thrown up by the strikes at the west coast ports has provided a mini bonanza for some European and east coast based manufacturers picking up a few more orders than they might have expected.