Terex AWP's Sales Drop 48 Percent in Q4

February 12, 2009 – Terex Corporation, Westport, Conn., reported net sales for fourth quarter 2008 dropped by approximately 20 percent to $2.08 billion, compared to $2.59 billion in the fourth quarter 2007, as declining demand for Terex aerial work platforms, construction, and materials processing businesses continued. Higher net sales in the cranes and mining businesses partially offset this number. Net sales for the year increased 8.2 percent from $9.14 billion in 2007 to $9.89 billion in 2008.

  

Terex reported a net loss for the fourth quarter 2008 of $421.5 million, or $4.46 per share, which includes pre-tax non-cash charges of $459.9 million, or $4.84 per share, for the impairment of goodwill in Terex’s construction, roadbuilding, and utility products businesses. Additionally, the company incurred pre-tax charges of $21.8 million, or $0.24 per share, primarily associated with a reduction in production levels in the fourth quarter of 2008. These results compare to net income of $174.0 million, or $1.67 per share, for the fourth quarter of 2007.

 

For the full year 2008, the company reported net income of $71.9 million, or $0.72 per share, compared to net income of $613.9 million, or $5.85 per share, for the full year 2007. The goodwill impairment charges mentioned above reduced net income by $4.60 per share for the full year, and other pre-tax charges totaling $25.8 million, primarily related to adjustment of the company’s production levels, decreased full year 2008 net income by $0.18 per share. Net income for 2007 included a $12.5 million pre-tax charge related to the early extinguishment of the company's 9-1/4 percent senior subordinated notes, which negatively impacted earnings per share by $0.08.

 

Net sales for the AWP segment for the fourth quarter of 2008 decreased $284.6 million, or 48.6 percent, to $301.3 million versus the fourth quarter of 2007. Excluding the translation effect of foreign currency exchange rate changes, net sales decreased approximately 45 percent. Net sales in North America were down 46 percent and were down 60 percent in Europe, Middle East and Africa, as compared to the fourth quarter of 2007, both primarily driven by weaker demand across all product lines.

 

Net sales for the Cranes segment for the fourth quarter of 2008 increased $66.4 million, or 10.0 percent, to $729.4 million versus the fourth quarter of 2007. Excluding the translation effect of foreign currency exchange rate changes, net sales increased approximately 18 percent. 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.

 

 

Order backlog

Backlog of orders deliverable during the next twelve months was $2.96 billion at December 31, 2008, a decrease of 29.3 percent and 18.5 percent versus December 31, 2007 and September 30, 2008, respectively. The decrease 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. During the fourth quarter, Terex also experienced softening demand and cancellations and rescheduling of orders in the cranes and mining businesses, as the company confirmed delivery expectations for production in 2009.

 

Cranes segment backlog decreased 4.0 percent when compared to December 31, 2007 levels, and was flat as compared to September 30, 2008 levels. As of September 30, 2008, cranes had not accepted firm orders for a variety of crane types, primarily rough-terrain cranes that were scheduled for delivery after January 1, 2009. Production volume for which firm orders had not yet been accepted, and therefore not included in backlog at September 30, 2008, approximated $648 million. A significant portion of these orders were cancelled during the fourth quarter of 2008 due to customer uncertainty regarding the global economic crisis. Backlog was also negatively impacted by a continued softening in orders for tower cranes.

 

The aerial work platform segment backlog decreased 87.3 percent, as compared to December 31, 2007, and decreased 67.7 percent, as compared to September 30, 2008, primarily due to a significant decline in demand during the fourth quarter as construction activity has dramatically slowed and many of the segment’s end markets have experienced 40 to 50 percent declines in demand.

 

 

2009 Update

Terex currently expects its 2009 net sales to decline in the range of 30 to 35 percent compared to 2008, approximately 13 percent of which is the estimated translation effect of foreign currency exchange rate changes. As compared to 2008, the aerial work platforms and utility products businesses are expected to be down 35 to 45 percent, and the cranes business is projected to be down 25 to 35 percent.

 

“Given the negative general economic conditions and the resulting effect on our industry, we are focusing our actions on cash flow generation, and aggressively reducing production levels, incoming material and our cost base,” said Tom Riordan, Terex president and chief operating officer. “In response to the global credit crisis, the company began taking actions during the third quarter of 2008, and as the global economy continued to weaken, the company accelerated its responses. Actions have been taken to slow, and in some cases stop, the production of our products and to reduce the company’s workforce for those realities…It is a very unfortunate statement, but in excess of 5,000 jobs, including the majority of our temporary workforce, have been or are expected to be eliminated as compared to our June 2008 employment levels.”

 

The company stated that effective January 1, 2009, the roadbuilding business will be consolidated within the construction segment, and the utility products businesses will be consolidated within the AWP segment. The Roadbuilding, Utility, and Other segment will cease to be a reportable segment.

Click here for Terex’s complete financial results.