Terex Q1 income declines

21 April 2011

Ron DeFeo, Chairman and CEO at Terex

Ron DeFeo, Chairman and CEO at Terex

Terex reported first quarter net income of US$ 11.7 million, down from US$ 539.9 million a year earlier. In 2010, the result had been enhanced by gains from Terex's US$ 1.3 billion sale of its mining equipment business to Bucyrus.

Net sales increased +34.2% year-on-year to US$ 1.3 billion in the first quarter of 2011, boosted by a +67.7% increase construction segment sales to US$ 343 million. Terex said growing demand for backhoe loaders in Western Europe and Russia as well as strong demand for trucks, particularly for quarry applications in developing markets, had fuelled the positive result.

Terex chairman and CEO Ron DeFeo highlighted the significant increase in order backlog seen in all four of the company's business segments. Total order backlog was up +46% year-on-year to US$ 1.8 billion.

But the company nevertheless reported an operating loss of US$ 9.3 million for the three-month period, albeit an improvement on the US$ 66.5 million operating loss it recorded in the first quarter of 2010. Mr DeFeo said the rising cost of raw materials impacted the company's operating performance.

"Somewhat offsetting favourable demand trends are increased input costs, mostly associated with purchased materials such as steel, hydraulics, tyres and other manufacturing components.

"In response, we have recently increased pricing in an effort to regain the profitability we would expect from each product line. We also see some potential risks associated with component availability and are monitoring our supplier base closely," Mr DeFeo said.

And the company's cranes segment also continued to drag on results, affected by inconsistent demand, while further challenges are expected for the first half of 2011. But Terex was more optimistic on longer term prospects for the business unit, pointing to a "significant increase in demand" in North America as well as a continued increase in activity in developing markets.

Mr DeFeo said the company expected to report full-year 2011 net sales of between US$ 5 billion and US$ 5.4 billion.

"We also expect each of the remaining quarters in 2011 to deliver positive net income and earnings per share," Mr DeFeo said, adding that in the longer term the company is focused on achieving US$ 8 billion in net sales and an operating margin of 12%.

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