Terex Cranes holds up as group profits slump
By Euan Youdale12 February 2009
Terex Cranes saw net sales rise 10% in the fourth quarter of 2008, amounting to US$729.4 million, compared to the same period in 2007.
The growth was in stark contrast to the group's overall fortunes in the 2008 financial year. Terex booked a $460 million impairment charge in the fourth quarter, giving it an operating loss of $392 million for the three months. Net sales for the quarter were $2.08 billion, down 20% on 2007.
The charge in the fourth quarter, which related to write-downs of goodwill in the company's construction, road building and utility products businesses, took the company's net profit for the full year down to just $72 million, a near 90% fall on the figure of $614 million seen in 2007. Sales in 2008 were up 8% on 2007 at $9.89 billion.
Crane segment net sales, excluding the translation effect of foreign currency, increased by about 18%. "Favorable pricing and sales volume for high capacity cranes, including crawler cranes, all terrain cranes and rough terrain cranes, more than offset continued softness in boom trucks and highway truck cranes and recent softening in tower cranes," Terex reported.
Operating income rose to $100.9 million in the crane segment, compared to $83.7 million during the same period in 2007. The increase was primarily due to increased volume, favorable pricing and product mix, added the company. The segment's backlog was down 4% on the 2007 financial year fourth quarter and was flat compared to the end of the third quarter 2008.
Group backlog, however, was down 29.3% and 18.5%, compared to 31 December 2007 and 30 September 2008, respectively. This was mainly driven by significant reductions in orders for the aerial work platforms, materials processing and construction businesses, as well as the translation effect of foreign currency exchange rate changes, said the company.
Terex has also said it is likely to breach its credit covenants by the end of the first quarter. It is in discussions with its banks to renegotiate credit terms. A statement said, "Should the company not be able to obtain such consent or amendment, there could be adverse consequences to the company's liquidity."
Commenting on the events of 2008, chairman and CEO, Ron DeFeo, said, "The past year has been like no other - the first half of the year exhibited robust growth and expansion, while the second half of the year was severely impacted by the global credit crisis and economic deterioration, which drove significant declines in customer demand in our businesses."
For its outlook Terex has taken the unusual step of not providing any profit guidance for 2009. It says it expects sales to be down 30% to 35% on 2008 levels, which is to say $6.43 billion to $6.92 billion. "We will continue to take aggressive actions to reduce operating costs and improve our cash flow," added DeFeo.