Terex constrained by weak road building demand

27 October 2011



Despite reporting a +31% currency-adjusted year-on-year increase in third quarter sales to US$ 395.4 million, Terex's construction equipment division reported an operating loss of US$ 6.4 million.

While the loss was narrower than the US$ 7.7 million loss reported for the same period in 2010, Terex said it had been impacted by continuing slow demand for road building products as well as costs associated with restructuring, higher input costs and supplier constraints.

In North America, demand was softer due to weak highway infrastructure spending, while in Brazil, the company said a tightening in government-sponsored financing programmes was also constraining road building demand.

As a result, Terex said it had taken steps to adjust road building production levels.

Offsetting this, construction equipment sales were boosted by strong demand for backhoe loaders in Russia, compact equipment in central Europe and trucks in developing markets including Russia and South Africa.

Terex said demand for material handlers continued to increase, especially in central Europe - the construction equipment division's largest market for this type of machinery.

Terex chairman and CEO Ronald DeFeo said the company planned to raise its overall prices. Speaking from a group perspective, he said, "As a result of price increases which we will be instituting, as well as cost saving initiatives across our businesses, we expect increases in profitability to outpace our growth in net sales."

The construction equipment division's third quarter order backlog increased +110% year-on-year at currency adjusted rates, but fell -3% compared to 30 June, 2011. Terex said the primary driver for the quarter-on-quarter decrease was softening overall demand for trucks.

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