Terex Stays in the Red

Construction and mining equipment manufacturer Terex Corporation (TEX - Analyst Report) announced its third quarter results recently. The company reported wider-than-expected net loss for the quarter. Terex posted a net loss of 77 cents per share, compared to the Zacks Consensus Estimate of a net loss of 33 cents.

Profits in the Cranes and Materials Processing & Mining segments were more than offset by losses in the Aerial Work Platforms and Construction segments. The company had posted net profit of 96 cents per share in the comparable quarter of 2008.

Net sales during the quarter declined 51.2% to $1,226.1 million from $2,514.6 million in the third quarter of 2008 due to weak sales at all of the company’s businesses, as well as an unfavorable foreign currency translation impact. Sales declined in all the four segments due to the impact of the global economic slowdown on target markets. Order backlog stood at $1,522.0 million at the end of the third quarter, down 58% from last year.

The Aerial Work Platforms division posted a 65.5% decline in sales on a year-over-year basis. Sales decline was due to lower volumes in North America and Europe, as customers continued to defer the purchase of new products.

The Construction segment reported a 55.9% decline in sales compared to the corresponding period of 2008 due to weak demand for both compact and heavy construction equipment as well as lack of financing availability for projects and capital equipment. Residential and commercial construction activity continued to remain low across the markets.

In the Cranes business, revenue declined 38.3% due to significantly lower sales of both rough terrain and tower cranes as a result of delay/cancellation of commercial construction projects and decline in oil related energy demand for rough terrain cranes.

In the Materials Processing & Mining segment, revenue decreased 48.8% compared to the third quarter of 2008, primarily due to a 60% decline in materials processing equipment sales. The company saw a drop in net sales of mining equipment also due to lower demand for hydraulic excavators and drills.

For the full year, the company continues to expect net sales to decline by approximately 50% compared to 2008. This forecast includes an unfavorable foreign currency translation impact of 5%. With no substantial recovery expected in any of the company’s end-markets in the near-term, we believe it is impossible for the company to post profits in the next couple of quarters.

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