Terex AWP doubles sales but suffers growth pains
By Murray Pollok21 July 2011
Terex AWP's second quarter sales more than doubled to US$484.1 million, with North America and Brazil showing strong growth and western Europe strengthening. The division made operating profits of $28.2 million compared to a $2.3 million loss in the same quarter in 2010.
The increase in profits was offset by "manufacturing inefficiencies" at some facilities, as well as supplier shortages and increased costs from suppliers.
"AWP costs, both material and headcount, caused some disappointment in our margin performance for this segment", said Ron DeFeo, chairman and chief executive officer of Terex Corp, "Our previously announced 4.5% price increase in AWP should begin helping our performance in the second half of 2011."
The division's $447.8 million backlog was virtually unchanged from the end of the previous quarter. Terex said the backlog was flat because major orders were placed earlier in the year than is normal.
AWP's revenues for the quarter included receipts from the disposal of its US utility boom rental fleet, the sale of which began in late 2010.
Terex's Construction division, which sells skid steers, backhoe loaders, excavators and dump trucks, reported a 29.5% increase to $361.3 million for the second quarter, "driven by strong demand for material handlers and increased demand for trucks, especially in developing markets like Russia and Latin America."
Terex also saw increased demand for compact equipment from the rental channel in the Americas and high demand for backhoe loaders in Northern Europe and Russia. However, sales of road building equipment saw a sharp decrease, mainly in Brazil, where a tightening of government sponsored finance packages constrained demand.
As a group, including the cranes business - which is acquiring industrial crane and port crane business Demag Cranes - sales grew by 37.8% to $1488.2 million, with operating profits of $0.9 million compared to a $13.1 million loss in the same period in 2010.
Group operating revenues before one-off charges would have been $43 million, with a $33 million charge allocated to a cost reduction initiative at the Cranes division, which is adjusting to softer demand in Europe.
"We have made progress during the first six months of 2011, but there is still significant work in front of us," said Mr DeFeo, "We had strong performance in terms of order and sales activity in the second quarter but supplier constraints on component deliveries and other operational challenges caused operating margins to be below expectations."
The company's full-year guidance is for revenues in the $5.4 to 5.6 billion range, which is a small upgrade on the previous guidance of $5.2-5.5 billion.