Terex Corporation
(
TEX
) has inked an agreement with China-based Sinomach Heavy Industry
Corporation to make the latter a strategic partner for its troubled
crane business, Sichuan Changjiang Engineering Crane Co. (SCE
Crane). Under the deal, Sinomach will own more than 50% of SCE
Crane and Terex will offer its overseas distribution and support
channels as well as engineering capabilities for the business.
Sinomach is a wholly-owned subsidiary of China Machinery
Industry Corporation. The company specializes in restructuring and
integrating engineering machinery business resources. It has joint
ventures with companies including Hyundai Corporation,
Komatsu
Ltd.
(
KMTUY
) and Martec.
Earlier in 2006, Terex had acquired about 50% interest of
Sichuan Changjiang Engineering Crane Co., Ltd. Terex was the first
foreign company to acquire a Chinese crane company at that time.
The company intended to capture the wide customer base in the
emerging market of China. The senior management of SCE Crane owns
the remaining 50% interest in the company.
However, in July 2011, Terex had announced to undergo
restructuring activities in the Cranes segment in 2012 when the
company saw operating losses of $56.5 million during the second
quarter of fiscal 2011. Terex had revealed that it expects the
restructuring activities to generate annual benefits of nearly $70
million in 2012, which will improve the segment's
profitability.
In 2010, Terex made two strategic acquisitions in China. The
company got hold of around 65% ownership of Shandong Topower Heavy
Machinery Company located in Jinan, China.
In addition, the company has formed a mobile materials
processing and equipment manufacturing joint venture with Quanzhou,
China-basedFujian South Highway Machinery Companyby acquiring a 60%
ownership in the latter. These acquisitions were made to complement
Terex's long-term strategy of expanding its footprint in the
country.
In August 2011, Terex acquired Demag Cranes, which helped the
company add industrial cranes and hoists of Demag to its product
portfolio. The combined manufacturing entity will help Terex
capturing the growing demand for cranes in China. Furthermore, a
substantial improvement in demand in the emerging markets could
offset the weaknesses faced by the company in the European
markets.
Terex reported fourth 2011 quarter adjusted earnings of 26 cents
per share, up 30% from the prior-year quarter and ahead of the
Zacks Consensus Estimate by a penny. Net sales increased 47% to
$1.96 billion surpassing the Zacks Consensus Estimate of $1.90
billion.
Terex expects operating margin to be in the range of 5%-6% for
fiscal 2012 in the Crane's segment, which generated nearly 31% of
total revenue in fiscal 2011. Price increases and restructuring
activities in this segment are expected to aid margins.
Terex Corporation is a global equipment manufacturer catering to
the construction, infrastructure, and surface mining industries.
The company's manufacturing facilities are located in the U.S.,
Canada, Europe, Australia, Asia, and South America. The company
sells its products through a worldwide distribution network. It
competes with the likes of
Caterpillar Inc.
(
CAT
),
Deere & Company
(
DE
) and Komatsu Ltd.
Currently, the shares of Terex retain a Zacks #2 Rank, which
translates to a short-term rating of Buy. However, we have a
Neutral recommendation on the shares of the company for the
long-term.
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TEX
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