Terex Cranes sales fall but still in profit
23 July 2009
Sales of rough terrain and tower cranes were badly hit as commercial construction projects were postponed or halted and oil related energy demand for rough terrain cranes slowed. Larger crawler and all terrain cranes are still needed for infrastructure projects and energy projects, including wind turbines and power station construction, according to the company.
Operating profit at Terex Cranes for the second quarter of 2009 was $20.0 million, down $106.3 million compared with the $126.3 million in the second quarter 2008. Operating margin was 4.1% down from 15.1% in the same period a year before. Profitability was down around $106 million due to lower net sales, Terex said.
Terex Corporation announced a net loss for the second quarter of 2009 of $77.6 million compared to net income of $236.3 million for the same period 2008. Net sales were $1.32 billion, down 55.0% from $2.94 billion in the second quarter of 2008. Adjusting for the translation effect of foreign currency exchange rate changes, net sales decreased about 49%.
"The turmoil from the ongoing recession continues to deeply impact sales for our industry," commented Ron DeFeo, Terex chairman and CEO. "Certain markets have stabilised but at low levels, such as Aerial Work Platforms and Materials Processing. Other markets, such as Mining and large capacity cranes, have begun to weaken, but at less dramatic rates. We are responding by aggressively reducing costs."
Tom Riordan, Terex president and COO, commented, "We are continuing to operate through some very challenging times. Our factories are working on reduced schedules, with a build-to-order approach, as we aggressively manage our business to further reduce inventory levels. During the second quarter, inventory reductions generated cash of approximately $278 million, and we are working toward exceeding our $500 million target for the year. We anticipate that further cost savings initiatives will need to be undertaken in order to eliminate operating losses by the end of 2009 in our most challenged businesses."
Riordan continued, "The balance of our businesses posted mixed results in the second quarter, with Mining and Cranes generating modest profitability. The large crane business remains generally healthy, with the large crawler crane business being the most stable."
Order backlog was $1.65 billion at 30 June 2009, a 60.9% decrease from 30 June 2008, and a decrease of 16.7% from 31 March 2009.
Net sales for 2009 are forecast to decline about 50% compared with 2008, around 7% of which is due to the estimated translation effect of foreign currency exchange rate changes. Previous guidance was for 2009 net sales to decline in the range of 40 to 45%, which included an estimated translation effect of foreign currency exchange rate changes of around 14%. The anticipated further decline in net sales reflects weak global end-markets combined with continued constrained credit availability worldwide, Terex said.
The impact of restructuring activities is expected to result in improved financial results for the second half of 2009; however, the current end-market demand for machinery in general makes it unlikely that Terex Corporation will be profitable, excluding charges relating to ongoing restructuring activities, in the second half of 2009.
