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'Supply chain challenges' hit Terex crane business in Q3 2018

Lowered cranes revenue and margin impact American giant's full-year outlook

Pictured here is the Terex-Superlift-3800. American equipment giant Terex expects foreign exchange headwinds in the year ahead.
Pictured here is the Terex-Superlift-3800. American equipment giant Terex expects foreign exchange headwinds in the year ahead.

American original equipment manufacturer (OEM) Terex Corporation has announced its Q3 2018 financial results. The Connecticut-headquartered, NYSE-listed company’s chairman and chief executive officer, John L Garrison, said Terex noted “strong global demand” for its products, despite its mobile crane operations facing challenges during the period.

“We increased sales, bookings, and backlog in the quarter,” Garrison continued.

“AWP [aerial work platform] bookings grew by 50% to $601m, reflecting continued strong demand for AWP products across all our major regions. Overall backlog increased by 41% to $1.6bn, led by a 72% increase in MP [materials processing].”

Terex acquired Demag Mobile Cranes, a manufacturer of telescoping and lattice boom cranes in 2002. In the same year, it acquired Genie, a manufacturer of AWPs. In August 2011, Terex closed the 82% share purchase of Demag Cranes, leading to the development of a new business segment for materials handling and port systems. Demag was fully integrated as a fifth segment within Terex Corporation after the domination and profit and loss agreement between Terex and Demag took effect in April 2012. 

It is yet unclear how much of the AWP business’s and Terex’s overall backlog expansions are related to Middle East contracts. Terex has yet to respond to Construction Week’s queries on these topics.

Terex reported Q3 2018 income of $38.4m and net sales of $1.2bn – the former figure is lower than its Q3 2017 income of $56.6m, and Terex said this was due to “a non-recurring interim period tax adjustment”. Its income from continuing operations for Q3 2018, as adjusted, was $51.4m.

“AWP continues to execute well, meeting growing customer demand and improving operating margins despite input cost headwinds including tariffs,” Garrison continued. 

“MP had another excellent quarter.  It improved its operating margin again, as it continues to execute very well across its portfolio of businesses.

“As a result of supply chain challenges, our mobile crane operations did not achieve its production plan. That led to lower cranes revenue and margin in the quarter, which impacts our outlook for the full year.”

READ: Terex appoints new EMEAR product manager for Genie

Construction Week has requested Terex for details of the supply chain challenges that its cranes business faced, and whether they impacted the OEM’s Middle East business.

Garrison said that while Terex’s “global markets remain strong”, its earnings per share (EPS) guidance would revert to the $2.70 mark to align with the OEM’s Q3 results, as well as its “updated production plan in cranes, higher input costs – including tariffs – and anticipated foreign exchange headwinds”.

The EPS figure had been raised to $3 in Q2 2018 to reflect Terex’s “first-half operational results, capital market actions, and […] expectations for the balance of 2018”, Garrison said this July. At the time of Terex’s Q2 2018 result announcement, the chairman added that Terex’s crane segment “improved as expected” over Q1 2018, “but continued to be impacted by material shortages”.

Terex’s year-to-date (ytd) crane sales total $950.5m, a notable growth over 2017’s ytd net sales of $869.6m. However, its Q3 2018 sales of $301.2m are marginally lower than Q3 2017’s sales of $301.9m.

Zahid Tractor is the distributor for selected Terex products in Saudi Arabia, while Terex Equipment Middle East handles operations for the OEM in the UAE, Oman, Bahrain, and Kuwait. 

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