New acquisitions accounted for a 3.4% rise in sales, and currency effects added 7.9%. Excluding these effects, net sales increased 14.1% in the second quarter of 2008 versus the prior year period.
Chairman and CEO Ron DeFeo said, “Results this quarter demonstrate the continued strength of our global franchise. The infrastructure and commodity boom is driving strong demand for our cranes and mining equipment. Based on our increasing backlog for these products, we expect these positive trends to continue.”
In the cranes sector, the company’s backlog increased 45.5%, compared to June 30, 2007 levels. As reported in the June 2008 issue of Cranes Today (p19), many crane companies are refusing to accept firm orders for cranes passed the end of the year. Compared to March 31, 2008 levels, Terex’s cranes backlog decreased 6.0%, due to crane orders received for 2009 delivery which are not included in the backlog because they have yet to be priced.
The company says that, “With regard to the reported backlog, it should be noted that Terex has not accepted firm orders for a variety of crane types, primarily rough terrain cranes, which have scheduled delivery after January 1, 2009. This was designed to ensure that prices for 2009 delivery sufficiently reflect the demand environment and potential input cost increases of the business. Production volumes for 2009 that have not been included in backlog approximate $484m, based on current pricing levels. The company anticipates establishing pricing for these cranes in the third quarter of 2008.”
The company said net sales for the cranes segment for the second quarter of 2008 increased 48.7% versus the second quarter of 2007, to $809.8m. Excluding the translation effect of foreign currency exchange rate changes, net sales increased approximately 34%. Global infrastructure and energy demand continues to drive strong sales of cranes, particularly larger capacity lattice boom crawler cranes, tower cranes and rough terrain cranes. The North American market remains strong for large capacity cranes, but sales of smaller capacity cranes, including boom trucks and lower capacity truck cranes, remain soft.
Cranes operating margin increased to 15.6% during the second quarter of 2008, up from 10.4% in the comparable prior year period. The increase was primarily driven by higher volume and favourable sales mix, combined with historical pricing actions working through the backlog. Cranes mix in the quarter was oriented towards higher margin larger capacity cranes. Supplier constraints in Europe for select components, such as hydraulics and gear boxes, have improved, as have welding and assembly capacity constraints.
Capacity changes are being implemented in the company’s cranes facilities, which are expected to increase throughput while minimizing the addition of fixed costs. For example, production of rough terrain cranes in the company’s Waverly, Iowa facility has already doubled in the past year as a result of efficiency gains, with no increase in square footage. Future throughput improvements are expected in the company’s German and Chinese crane manufacturing locations.
