Terex CEO:Decisions On Construction Sale Likely By Early 2010
September 16 2009 - 3:28PM
Dow Jones News
Terex Corp. (TEX) Chairman and Chief Executive Ronald DeFeo said
Wednesday he intends to decide by early 2010 which of the company's
construction equipment lines will be sold.
DeFeo said he's focused on lowering costs in recent months to
determine whether some struggling product lines could be retained.
But he acknowledged the company's presence in some markets may
never be large enough to consistently generate profits.
Terex, which makes a variety of equipment, including hydraulic
mining shovels, tower cranes and aerial work platforms, has
struggled to compete in mainline construction equipment categories
against larger rivals such as Caterpillar Inc. (CAT), CNH Global NV
(CNH) and Deere & Co. (DE).
"We've never really demonstrated the ability to be meaningfully
profitable in this business," DeFeo said during a JPMorgan investor
conference in New York broadcast over the Internet. "I'm going to
look at it by product type and make some decisions by early
2010."
Construction equipment amounted to 19% of Terex's sales in 2008.
Much of its construction equipment is manufactured in Europe,
leaving the company susceptible to unfavorable currency
translations when the equipment is sold in the U.S.
DeFeo added that Terex's construction business is "probably not
that attractive to anybody" unless it's connected to a company with
large market presence elsewhere that is looking to expand into
Europe. Industry analysts have speculated that Chinese equipment
manufacturers would be interested in Terex's assets.
DeFeo said Terex will likely hold on to its compact construction
equipment business and added that he's been satisfied with the
performance of the company's mining equipment business.
"It's a good business, but it's not a great business," he
said.
Connecticut-based Terex's has been an aggressive acquirer of
equipment brands in the past as the company looked for market
niches to dominate. But Terex's sales and profits have been hit
hard by the collapse of the construction sector in the past year.
Tighter credit conditions throughout the world choked off funding
for construction projects, reducing demand for new equipment.
DeFeo noted that sales have been dismal even in the company's
best-selling product lines, such as aerial work platforms and
cranes.
In the second-quarter, Terex lost $77.6 million, or 78 cents a
share, as sales fell 55% from a year ago. Terex moved to shore up
its balance sheet in recent months by tripling its cash balance
from the end of March to $939 million at the end of June and by
renegotiating the terms for its loan agreements.
"We have the liquidity and a management team that is focused on
generating cash," he said. "I think we can weather the existing
storm and a few more."
Terex's stock was recently trading up 3.3% at $19.63 a
share.
-By Bob Tita, Dow Jones Newswires; 312-750-4129;
robert.tita@dowjones.com