In recent month’s Terex has sold its mining business to Bucyrus International, and divested its Atlas loader crane operations. Other discontinued operations include the Load King and Powertrain businesses. It has also massively expanded its port equipment business with the purchase of Fantuzzi and Noell Crane. Terex made a net gain on the disposition of its mining business of $620.4m.
This helped net income during Q1 2010 reach $539.9m, compared to a net loss of $74.9m in the first quarter of 2009; while net loss from continuing operations improved from $98.5m in 2009 to $79m in 2010. Cash proceeds from the sale of its mining business also increased Terex’s liquidity quarter-on-quarter, which was up $843.5m to $2,295.8m at 31 March, 2010 against liquidity of $1,452.3m at 31 December, 2009.
However, net sales from continuing operations remained low. In Q1 2010, Terex recorded net sales of $935.9m, down from $965.8m a year ago; a 3.1% fall. Excluding the port equipment business and adjusting for the translation effect of foreign currency exchange rate changes, net sales fell 17% year-on-year.
The cost of goods sold was also lower, falling from $898.7m to $837.4m; while higher debts and other expenses were also recorded in Q1 2010.
“Clearly, we had significant gains from the sale of the mining business, but we also had a stable, but low, level of operating performance from continuing operations,” commented Ron DeFeo, Terex chairman and CEO.
Phil Widman, Terex senior vice president and CFO, said: “We have significant liquidity as a result of the recently completed divestiture of our mining business, our 2009 capital raising activities and the working capital reductions accomplished last year.”
In its cranes segment, Terex recorded net sales for Q1 2010 down $29.3m to $413.7m versus Q1 2009. Lower capacity crane demand, including the lower end of the all terrain product category, deteriorated in Q1 2010 year-on-year, as commercial construction demand remained soft, Terex said. Customers continued to purchase high capacity crawler cranes during the first quarter of 2010, driven by global infrastructure and power projects. Tower crane and rough terrain crane demand remained stable, albeit at low levels.
An operating loss of $3.1m was incurred in the cranes segment during Q1 2010, a decrease of $32.7m when compared with an operating profit of $29.6m generated during Q1 2009. Lower net sales, offset by the mix of larger cranes in the production schedule and the impact of reduced materials cost, negatively impacted profitability by approximately $17m. Terex said restructuring charges taken in the quarter totalled approximately $8m, which muted the favourable impact of segment-wide cost saving initiatives taken in 2009. Losses in the port equipment business negatively impacted operating profit by approximately $4m when excluding restructuring charges.
Crane segment backlog was also on the slide in Q1 2010. Backlog at 31 March, 2010 decreased 38% as compared to 31 March, 2009, and 16% as compared to 31 December, 2009. Excluding the impact of the port equipment business acquisition during the third quarter of 2009, backlog decreased approximately 50% as compared to 31 March, 2009. The majority of backlog in Terex’s crane segment is composed of high capacity crawler cranes and high capacity all terrain cranes, as well as port equipment. Terex said demand for smaller capacity cranes continues to remain weak, and smaller all terrain cranes have recently experienced a weakening demand trend, while demand for larger crawler cranes appears to have increased.
DeFeo said Terex remains confident of achieving its previously stated sales and growth goals. “While we believe end markets will not provide much sales volume benefit in 2010, current trends have increased our confidence in a more robust 2011 operating environment,” he said. “We remain confident in the long-term outlook for our business and are focused on achieving positive earnings per share performance exiting 2010, as we have previously indicated.
“Our expectation for full year 2010 performance heading into this year was for sales to be approximately $5bn, resulting in breakeven operating performance before interest and taxes, and excluding restructuring and unusual items.
“We view our operating results this quarter as being in line with our previous outlook. Longer term, we remain focused on the growth goals we previously established for Terex. Assuming a return to a more normalised economic operating environment, based on the historical performances of our remaining businesses, we believe doubling our revenue, with net income of approximately $6 per share, is achievable by 2013.”