Terex Corp. last week announced net income for the first quarter of 2008 of $163.3 million, or $1.59 per share, compared to net income of $113.8 million, or $1.09 per share, for the first quarter of 2007, an increase in earnings per share of 46 percent. Net income for the first quarter of 2007 included a $12.5 million pretax 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 reached $2.4 billion in the first quarter of 2008, an increase of 17.4 percent from $2.0 billion in the first quarter of 2007. The increase in net sales versus the prior year period was favorably impacted by acquisitions and by the effect of currency exchange rates (1.9 percent and 6.1 percent, respectively). All per-share amounts are on a fully diluted basis.
“We are pleased with the first quarter’s results, with both net sales and net income growth posting solid double-digit percentage increases versus the prior year,” said Ron DeFeo, Terex chairman and CEO. “The strength of international end markets and the continued strength of the domestic U.S. ‘in-the-air’ products yielded excellent results in our Aerial Work Platforms and Cranes business segments. Continued demand for commodities drove favorable results for our Materials Processing & Mining business segment. The performance of the balance of our businesses, namely the Construction, Roadbuilding and Utility operations, were somewhat disappointing for the quarter. We believe, however, that the near-term outlook is positive for the Construction segment, and that its operating margin will improve in the mid-year period and lead to good margin expansion on a year-over-year basis in 2008. In general, we think that all of our operations continue to have solid prospects heading into the remainder of the year.”
Tom Riordan, Terex president and chief operating officer, added, “We remain confident about our business outlook for the remainder of 2008. Looking forward, we can see challenges in material costs, especially as we move into the second half of 2008. We intend to address these cost increases through pricing actions to recover lost margin arising from higher component costs. While we anticipate that we will be able to implement these pricing actions timely and effectively, we realize that there is a certain level of risk and exposure that may materialize in the second half of the year.”
Global infrastructure spending continued to drive increased demand in many product categories, particularly Cranes and Materials Processing & Mining equipment, as well as the Aerial Work Platforms product category in North America. In addition, the increase in net sales versus the prior year period was favorably impacted by approximately $122 million because of the translation effect of foreign currency exchange rate changes, primarily the strength of the Euro, British Pound and Australian Dollar relative to the U.S. Dollar, as well as the inclusion of $38 million in net sales from recent acquisitions.
Net sales for the Aerial Work Platforms segment for the first quarter of 2008 increased $38.9 million, or 7.1 percent, to $586.6 million versus the first quarter of 2007. Excluding the translation effect of foreign currency exchange rate changes, net sales increased approximately 5.8 percent. Strong U.S. demand coupled with international demand, primarily in the Middle East, Russia and Eastern Europe, continued to drive higher sales volume.
The favorable performance in the U.S. market versus expectations helped to offset slightly weaker performance versus expectations in the Western European and Asia Pacific regions. Demand for boomlifts drove sales higher, but was offset somewhat by slower telehandler sales in both the U.S. and Europe. Operating margin in the first quarter of 2008 was essentially flat when compared to the first quarter of 2007, as increased sales volume was offset by costs associated with the expansion of global sales and distribution infrastructure.
Net sales for the Construction segment for the first quarter of 2008 increased $40.5 million, or 9.9 percent, to $448.3 million versus the first quarter of 2007. Excluding the translation effect of foreign currency exchange rate changes of $29.8 million and ASV sales since its acquisition of $21.3 million, net sales decreased approximately 2.6 percent. The U.S. market remained relatively weak and the European market was moderately slower. This decline was mostly offset with positive developments in the Middle East and Eastern Europe.
Net sales for the Cranes segment for the first quarter of 2008 increased $131.4 million, or 26.2 percent, to $632.2 million versus the first quarter of 2007. Excluding the translation effect of foreign currency exchange rate changes, net sales increased approximately 15.4 percent. Very strong global demand, particularly for large crawler cranes and mobile telescopic cranes, continued to drive robust sales and order activity. Growth in rough-terrain cranes sales in the quarter reflected North American and Middle East market strength, particularly from the energy sector, while sales of boom trucks and smaller truck cranes in North America remained under pressure.
In the Roadbuilding, Utility Products and Other segment net sales for the first quarter of 2008 decreased $9.6 million, or 5.4 percent, to $169.2 million versus the first quarter of 2007. This is directly related to the decrease in concrete mixer truck demand resulting from continued softness in the North American housing construction market. Additionally, the prior year’s results reflected an unusual positive effect of the Tier-3 engine changeover, which resulted in an elevated level of customer demand ahead of the introduction of the higher cost, stricter emissions engine.
The company said it will continue to monitor the estimated fair value of the roadbuilding business for purposes of determining whether an impairment is evidenced.
“In February, we provided earnings guidance for our 2008 performance, indicating that we anticipated earnings per share to be between $6.65 and $7.15 and net sales to be between $10.0 and $10.5 billion,” said DeFeo. “Given our strong performance this quarter, balanced against the uncertainties surrounding some of our end markets and increased input costs, we now anticipate earnings per share for 2008 to be towards the middle to high end of our previously announced range, or $6.85 to $7.15 per share, on net sales of $10.5 to $10.9 billion.”
