Demag acquisition boosts Terex sales20 February 2012
Chairman and CEO Ron DeFeo said, "“During 2011, we made significant investments and improvements and implemented actions to set us on a course toward improved profitability in 2012 and beyond. We have seen further recovery in many of our end markets as utilization rates improve and existing fleets age.
“The cost reduction initiatives during 2010 and 2011 have resulted in an improved cost structure as we begin 2012. During this past year we fought to maintain and in many cases grew our market shares resulting in increased production rates at many of our facilities.
"Given the severity of the economic crisis in 2009 and 2010 in our product categories, re-establishing base production levels and facility utilization rates were required to improve profitability. Our ongoing goal is to establish a leaner, more customer responsive organization. These efforts have allowed us to improve output with a reduced manufacturing space of approximately 7%.
"From a segment perspective, we continue to see recovery in most of our end markets. Earlier in the year, our Cranes segment returned to profitability led by a new management team and a leaner organization. Our port equipment business began 2011 with significant losses but ended the year with a modest fourth quarter profit and a strong backlog for 2012.
"The [former Demag Cranes AG] materials handling and port solutions business performed as expected since our acquisition on August 16 2011."
The company said that net sales were up 50% for port equipment businesses within its cranes segment. The company recently launched a new business segment, materials handling and port solutions, covering the factory and port crane business acquired with its purchase of Demag Cranes AG.
In this segment, net sales for the fourth quarter of 2011 were $361m. Net sales were driven by machine sales for industrial cranes and mobile harbor cranes, due to strong orders during earlier parts of 2011. Service and maintenance sales also contributed, as good capacity utilization at customer plants led to an increased need for services. Germany and the United States were the largest drivers of net sales in the quarter, but Brazil, India and China also demonstrated considerable strength.
Quarterly losses from operations in materials handling and port solutions was $16.6m. These results included charges of $22.1m related to the step-up in the valuation of inventory at the acquisition date of Demag Cranes AG. This was partially offset by higher spare parts, service and maintenance revenue which generate higher margins than new machine sales.
Terex reported 2011 construction crane sales strong in North America and developing markets, but sliding in Europe. Net crane sales were up from $1.78bn in 2010 to $2bn in 2011.
In the fourth quarter, the company saw net crane sales up $44.6m, or 8.1%, to $593.7 million versus the fourth quarter of 2010. The company said it saw strong demand for rough terrains in North America, and for its Franna line of pick and carry cranes in Australia. However, crawler and all terrain sales slipped in Europe.
Income from operations in the cranes segment for Q4 2011 was $10.8m, or 1.8% of net sales, as compared with income from operations of $15.7m, or 2.9% of net sales, during the fourth quarter of 2010. Operating results benefited from increased volumes and improved product mix, as well as the restructuring activities that were taken earlier in 2011.
Negatively impacting crane segment profitability in the fourth quarter of 2011 were expenses of $6.0m for workforce reductions in Europe, a charge of $7.7m related to facility closures primarily in the Port Equipment business and a charge for a supplier quality campaign of $2.7m.