Terex Encouraged by AWP, Crane Segments Performance in Q1 2012 Results
In its first quarter financial report, Terex Corp., Westport, Conn., announced income from continuing operations of $20.5 million, or $0.18 per share, for the first quarter of 2012, as compared to income from continuing operations of $5.0 million, or $0.04 per share, for the first quarter of 2011.
Net sales were $1.8 billion in the first quarter of 2012, an increase of 44.8 percent from $1.26 billion in the first quarter of 2011. Excluding the impact of the acquisition of Demag Cranes AG, net sales increased approximately 16 percent from the comparable prior year period. Income from operations was $63.8 million in the first quarter of 2012, an improvement of $73.1 million when compared to a loss from operations of $9.3 million in the first quarter of 2011.
“We are pleased that 2012 is developing as planned,” stated Ron DeFeo, Terex Chairman and CEO. “While we still have a significant amount of work ahead of us, we have taken a solid step towards our margin expansion and cash flow objectives for the year. In fact, this is the first time in almost 10 years that we have generated positive operating cash flow in the first quarter, excluding the tax payment made this quarter as a result of the divestiture of the mining business. We have traditionally used cash in operations in the first quarter, but our improved profitability combined with progress in factory efficiency and inventory focus, helped deliver our improved cash flow.”
DeFeo noted that net sales were consistent with the company’s expectations. “North America was a strong market for most product categories, with the exception of our roadbuilding products,” he said. “We believe the global business environment continues to support growth and increased equipment sales. Although the Chinese market has softened somewhat, this was not unexpected and was built into our expectations for the year. We continue to be cautious about European markets where economic activity has been strong in some areas and weak in others.”
He added that Terex is encouraged by the performances of its aerial work platforms and materials processing (MP) businesses, both of which achieved operating margins in the high single digits. The cranes business improved significantly versus the prior year, with a positive operating margin of approximately 5 percent in the quarter versus a negative 4 percent in the prior year period on a similar net sales level, excluding the effects of the write-down of receivables in both periods. The material handling and ports segment's operating results were in line with what Terex anticipated for the quarter.
"We are focused on executing the plan we articulated in February, namely achieving in 2012 approximately $475 to $525 million in operating profit and earnings per share of $1.65 to $1.85 per share (based on an average share count of approximately 116 million shares and excluding the impact of restructuring and unusual items) on sales of $7.5 to $8.0 billion,” DeFeo said. “We believe, based on current economic conditions, that we can achieve these targets, while also continuing the momentum of cash generation started this past quarter."
Terex Aerial Work Platforms: Net sales for the AWP segment for the first quarter of 2012 increased $135.2 million, or 35.7 percent, to $513.4 million versus the first quarter of 2011. The company continues to see recovery in the North American rental channels for its aerial work platform products with demand continuing to strengthen. The Australian market also continued to demonstrate strong sales growth.
Income from operations in the first quarter of 2012 was $42.6 million, or 8.3 percent of net sales, as compared to income from operations of $5.7 million, or 1.5 percent of net sales, during the first quarter of 2011. Operating profit benefited primarily from increased volumes and pricing. These increases were partially offset by higher input costs.
Terex Cranes: Net sales for the Cranes segment for the first quarter of 2012 increased $21.1 million, or 5.3 percent, to $419.4 million versus the first quarter of 2011. North American businesses continued to exhibit strong demand, primarily for rough-terrain cranes. Terex also experienced good demand for its pick and carry cranes in Australia and certain port equipment products. Crawler crane sales remained soft in Europe as austerity measures have impacted large construction and power projects that typically use this type of product.
Income from operations in the first quarter of 2012 was $7.3 million, or 1.7 percent of net sales, as compared with a loss from operations of $22.5 million, or 5.6 percent of net sales, during the first quarter of 2011. Operating results benefited from restructuring activities that were taken during 2011, increased volumes and improved product mix, both in the current year period, as well as a $5 million charge for a customer insolvency in the first quarter of 2011. Partially offsetting this was a charge of approximately $12 million in our port equipment business in the current year period related to the write down of an acquisition related receivable.
Terex Material Handling & Port Solutions: Net sales for the MHPS segment for the first quarter of 2012 were $367.5 million. Net sales were driven by demand for industrial cranes, primarily process cranes and handling technology, and mobile harbor cranes. High customer capacity utilization led to increased field service and spare parts sales. Customers in Germany and the United States were the largest drivers of net sales in the quarter, followed by India and China.
Income from operations was $2.9 million. Operating results were positively affected by strong machine sales, especially higher margin port equipment, as well as spare parts, service and maintenance revenue. Operating performance improved sequentially as the step-up in the valuation of inventory that took place in 2011 did not recur in the current period. The operating results also were impacted by an allocation of approximately $6 million of corporate costs in the current period that was not included in prior periods.
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