Terex Corp. last week announced income from continuing operations for the second quarter of 2011 of $0.9 million, or $0.01 per share, compared to a loss from continuing operations of $13.1 million, or $0.12 per share, in the second quarter of 2010. Net sales from continuing operations were $1,488.2 million in the second quarter of 2011, an increase of 37.8 percent from $1,079.9 million in the second quarter of 2010. All results are for continuing operations, unless stated otherwise. Discontinued operations include the Mining, Atlas and Powertrain businesses. All per share amounts are on a fully diluted basis.
The second-quarter results were favorably impacted by an after-tax gain of approximately $26 million, or $0.22 per share, on the sale of approximately 1.4 million shares of Bucyrus International common stock, and were negatively impacted by restructuring and related after-tax charges of approximately $33 million, or $0.29 per share, relating to the Cranes segment, where the company continues its cost reduction and manufacturing footprint rationalization. There were also after-tax charges related to the pending acquisition of Demag Cranes AG of approximately $3 million. Adjusting for these items, income from continuing operations would have been approximately $11 million, or $0.10 per share.
“We have made progress during the first six months of 2011, but there is still significant work in front of us,” said Ron DeFeo, Terex’s chairman and CEO. “We had strong performance in terms of order and sales activity in the second quarter but supplier constraints on component deliveries and other operational challenges caused operating margins to be below expectations. Our sales grew by 38 percent over the prior year period and 18 percent over the first quarter of 2011.”
Net sales for the Aerial Work Platforms segment for 2Q11 increased $251.7 million, or 108.3 percent, to $484.1 million versus the second quarter of 2010. The North American and Brazilian markets continued to show strong growth and Western European market demand has continued to strengthen from last quarter. Booms and telehandlers demonstrated particular sales strength and significant growth was seen across all product lines. Additionally, price increases were implemented late in the quarter in all geographies, with the benefits expected to be seen in the second half of the year. Also contributing to the increase in segment sales was the disposition of the remainder of the segment’s utility rental fleet, the first portion of which was sold in late 2010.
Net sales for the Construction segment in the quarter increased $82.3 million, or 29.5 percent, to $361.3 million versus the second quarter of 2010. The improvement in net sales was again driven by strong demand for material handlers and increased demand for trucks, especially in developing markets like Russia and Latin America. Higher demand in North America relating to increased mining activity also led to higher truck sales in Canada. Also contributing to the increase in net sales was demand for backhoe loaders in Northern Europe and Russia, increased interest in compact equipment in both rental outlets and the distribution network throughout the Americas and strong parts sales driven by aging fleets and higher utilization. This increase was offset by a sharp decrease in Roadbuilding products, predominantly in Brazil, where some tightening in government sponsored financing programs constrained demand.
Net sales for the Cranes segment increased $15.0 million, or 3.3 percent, to $464.1 million versus the second quarter of 2010.
“We anticipate that Cranes restructuring actions will improve that segment’s performance, particularly in 2012,” DeFeo said. “In total, we expect approximately $70 million in annualized benefit from the actions that have and will be taken in that segment. These changes reflect headcount and facility adjustments, and, while painful, we anticipate a stronger and better franchise in the future.”
Rough terrain cranes, truck cranes and mobile port equipment demonstrated the most significant contribution to sales growth this quarter, especially in North America, where rough terrain and truck cranes have shown particular strength. Tower cranes and some of the large crawler cranes have also experienced positive trends this quarter and the segment is seeing some renewed interest in tower cranes from very low 2009 demand levels.
"The Demag Cranes AG purchase offer has met our expectations and progressed well,” DeFeo said. “At the end of the extended offer period, preliminary results indicate that approximately 82 percent of the outstanding shares were tendered for purchase or are already owned by Terex. Demag Cranes AG will add a new business segment to Terex with world-class products in industrial cranes and hoists, port technology and service. Demag Cranes AG’s business is highly complementary to the existing Terex business, and the combination has compelling industrial logic. The addition of Demag Cranes AG is expected to add approximately $1.7 billion annually in net sales with a strong footprint in Europe and emerging markets. The completion of the offer still remains subject to merger control clearance by the European Commission. We expect that this transaction will close in the third quarter of 2011."
Net sales for the Materials Processing segment for 2Q11 increased $53.2 million, or 39.3 percent, to $188.7 million versus the second quarter of 2010.
Terex anticipates that its full-year performance will be near the top of its range for net sales. The company’s prior expectation for full-year 2011 was for net sales to be between $5.2 billion and $5.5 billion, resulting in EPS, excluding restructuring and other items, between $0.60 and $0.75. Current expectations are for full-year 2011 net sales to be between $5.4 billion and $5.6 billion, excluding any impact from the Demag Cranes AG transaction.
Income from operations in the second quarter of 2011 was $21.1 million, or 11.2 percent of net sales, compared to income from operations of $9.2 million, or 6.8 percent of net sales, during the second quarter of 2010. The primary drivers of the improved operating performance were better manufacturing utilization and product mix and pricing.
Westport, Conn.-based Terex Corp. is a diversified global manufacturer operating in four business segments: Aerial Work Platforms, Construction, Cranes, and Materials Processing.
