Konecranes Lundmark explains Demag decision

26 July 2011

Terex Cranes, which already owns the Demag-branded mobile crane business, announced in July that it had agreed to buy the port and industrial rump of the company, subject to regulatory approval. Terex paid a 53% increase on last quoted share price before rumours of a merger spurred speculation.

Lundmark said Demag’s share price increase was not warranted. “Historical performance and a predominantly European asset base did not, in our view, warrant the required price when the world’s industrial growth is more and more driven by emerging markets.”

Konecranes acquired six companies in Chile, Austria, Germany, Spain, Saudi Arabia and India this half. This includes the acquisition of Indian WMI Cranes, consolidated into Konecranes’ financial reporting in February 2011. Konecranes said, “The acquisition marks an important step in strengthening Konecranes’ position on the growing crane market in India. In 2010, WMI’s net sales exceeded €30m.”

Konecranes has already stamped out a presence in the Asia Pacific region, as sales there have increased 28.3% to €141.1m this half, while sales in its largest market, Europe, grew apace at 26.9% to €460.5m. Sales in the US increased by 16.8% to €245.8m.

While Konecranes’ net services sales increased 13% from €323.2m to €365.1m this half, the operating profit for services dropped in the half to €21.8m from €25, because of the cost of acquisitions, branch expansions, and IT development. Costs of €6.9m resulted from acquisitions in this half year period.

Equipment sales jumped from €221.6m to €288.9m in the second quarter, and orders are accumulating. Industrial crane orders accounted for 45% of all orders this January and were of a higher number than in the previous year, despite increased industrial crane prices. Orders for both equipment and services are valued at €981m, 43.2% higher than a year ago.

A full order book must be weighed against economic uncertainties, Konecranes warned. Konecranes said that profits could be variable, as it may be filling orders at irregular intervals for large port crane projects. Also affecting orders is the potential impact of macroeconomic changes related to levels of public debt in the US and Europe, said Konecranes.

Markets are busy in the face of these uncertainties with cargo handling and industrial sectors seeing especially high levels of activity. Industrial capacity utilization in Europe and the US was nearing levels in 2008, before the financial crisis. The cargo sector, too, showed an upturn as container traffic increased by approximately 8%.

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Konecranes Smarton in situ. Konecranes Smarton in situ.