Terex returns to profit

16 February 2012

Ron DeFeo, Chairman and CEO at Terex

Ron DeFeo, Chairman and CEO at Terex

Terex achieved an operating profit of US$ 82.1 million last year, compared to 2010's loss of US$ 73.8 million. Net profits for 2011 stood at US$ 40.5 million, compared to US$ 359 million in 2010 - the company would have made a significant net loss in 2010 were it not for the sale of its mining business. Revenues from continuing operations in 2011 stood at US$ 6.5 billion, a +47% increase on the previous year's figure of US$ 4.42 billion.

Terex chairman and CEO Ron DeFeo said," During 2011 we made significant investments and improvements and implemented actions to set us on a course towards improved profitability in 2012 and beyond. We have seen further recovery in many of our end markets as utilisation rates improve and existing fleets age." This is consistent with an overall improving construction and economic environment."

One key reason for the growth in Terex's top line was the addition of its Materials Handling and Port Solutions (MHPS) division in 2011, which contributed US$ 617 million in revenues, although it made an operating loss of US$ 19.2 million.

In terms of Terex's individual segments, the biggest growth in revenues came from its Ariel Work Platform (AWP) division, which sells machines under the Genie brand. Here sales were up +63% to US$ 1.75 billion, and operating profits came in at US$ 86.3 million - a 30-fold increase on 2010's figure of US$ 2.8 million.

The only other part of Terex's business to see profitable growth last year was its Materials Processing (MP segment), where revenues were up +28% to US$ 682 million, and operating profits were US$ 60.4 million - a +147% rise on 2010.

These profits were offset by losses in both Terex's cranes and construction equipment businesses. Although revenues from Cranes sales grew 12% to a fraction under US$ 2 billion in 2011, the division recorded a US$ 19.8 million operating loss, compared to a profit of US$ 33.5 million in 2010. However, Terex pointed out that the cranes business was in profit for the fourth quarter of the year following the appointment of a new management team earlier in 2011.

The construction segment meanwhile saw revenues climb +39% to US$ 1.5 billion, but the business still recorded a loss of US$ 18.4 million. Although this was an improvement on the US$ 52 million loss of 2010, a statement from Terex said, "The construction segment continues to be our most challenging operation."

The company said issues included the implementation of Tier 4 Interim/Stage IIIB engine requirements, weak end-user demand for road building equipment, and other weak markets such as the US residential construction sector impacting on the demand for its products. "We believe we have now positioned the segment for profitability in 2012 and will be focusing on geographies and products where we have the greatest profitability," the company added.

Outlook

Terex says it expects to achieve sales of between US$ 7.5 billion and US$ 8.0 billion in 2012, an increase of +15% to +20%, excluding the impact of acquisitions made in 2011. Operating income is expected to see a steep rise and is forecast to come in at between US$ 475 million and US$ 525 million as profitability improves across the board and Terex is able to pass on to customers some of the price increases it experienced in 2011.

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