02.08.2017

Terex Cranes bounces back to profit

Terex Cranes has reported a positive second quarter in terms of profits and order intake.

Looking at the first half numbers total revenues were almost 15 percent lower at $568 million, while the company’s operating loss was reduced from $29.4 million last year to $18.3 million this year.

Moving on to the second quarter revenues also fell by 15 percent coming in at $303.8 million, however order intake improved boosting the backlog/order book by 29 percent to $459 million compared to the same point last year, and almost 13 percent up on the quarter. The crane business also posted an operating profit of $14.5 million compared to a loss in the same quarter last year of $12.8 million.

As a result of the improving fortunes the company has lifted its forecasts for the full year and now expects to come in with year revenues six percent lower at roughly $1.2 billion, rather than 11 percent lower as originally forecast.

The Terex group as a whole, which now comprises just Cranes, Aerial lifts and Material processing, first half revenues were nine percent lower at $2.19 billion, while pre-tax profits improved 22.5 percent to $29.9 million. Net debt at the end of June has been cut to $433.4 million from $1.1 billion at the same point last year.

Terex chief executive John Garrison said: “Our Cranes segment returned to profitability in the second quarter, realising benefits from its restructuring programme. Our Materials Processing (MP) segment continued its excellent performance, growing sales and operating margin for the third consecutive quarter. Aerial Work Platform sales were better than expected on the strength of the North American market, however, operating margins compressed on pricing dynamics, higher steel costs and the strength of the US dollar.”

“Looking forward, backlog in our three segments grew substantially, up 36 percent year over year. This is the second consecutive quarter that we increased backlog in each segment. AWP backlog grew 46 percent including growth in North America, Europe and Asia. MP backlog was up 33 percent and Cranes backlog grew 29 percent.”

“We continue to implement our strategy to focus and simplify the company, and build capabilities in key commercial and operational areas. By completing the sales of our UK and Indian back-hoe loader businesses, we delivered on our commitment to focus our portfolio on our three core segments. In Germany, we signed an agreement to sell our Crane manufacturing location in Bierbach, and reached agreement with the Works Council to proceed with our footprint rationalisation and cost reduction plans. Our ongoing efforts to expand our capabilities in sales execution and account management through our Commercial Excellence initiative is starting to be reflected in our growing bookings and backlog.”

“We continue to follow our disciplined capital allocation strategy. We monetised $277 million of Konecranes shares for a year to date total of $549 million. We repaid the $254 million remaining on our 6.5% notes and repurchased 9.4 million Terex shares for $316 million, bringing our total to 15.9 million shares for $517 million for the first six months of the year.”

“Combining our first half results, with our current view of market and operational expectations in the second half and our ongoing capital market actions, we are increasing our full year adjusted EPS guidance to $1.05 to $1.15. This reflects improved net sales and operating profit guidance.”

Vertikal Comment

This is a very encouraging set of numbers from Terex, which fits in with the increased activity we have seen in the market. While it still has a long way to go, the company is making solid progress, particularly in Germany with the resurgence of the Demag branding. While in North America the production shifts to Oklahoma, should begin to settle helping reduce costs and overheads. The business is also being simplified which should create a solid foundation from which to base its growth plans going forward.

The key to the next stage of the turnaround will be the way the new cranes being shipped today perform in the real world. If they prove to be as reliable as promised and performance lives up to expectations, the company should be well positioned for a good 2018. There is still a good deal of confidence and goodwill to win back of course, but these two factors need to be right before that can happen. IF it does then the company might even exceed its upgraded forecasts?