Terex Corp. (TEX) is scheduled to report its second-quarter earnings next week. We expect the company to post a quarterly net loss of $0.09 per share on an estimated sales decline of 44%.
Terex is experiencing weak demand conditions in all its four segments. Aerial Work Platforms customers in North America and Western Europe have significantly slowed their purchases since the second half of 2008 due to the softening of construction activity and global economic uncertainty. In the Construction segment, sales are down due to weak residential and commercial construction across markets.
Sales in the Cranes business are adversely impacted by the delay or cancellation of commercial construction projects. In the Materials Processing & Mining group, Terex is witnessing weak demand for its materials processing equipment.
Sales were down in all the four segments in the first quarter and we expect the same for the second quarter. The company expects to post year-over-year net sales decline of 40–45% for fiscal 2009.
In response to a weak demand environment, Terex has taken several actions to reduce costs and inventories across the board. These actions have already resulted in a $208 million spending reduction and the company targets to reduce spending in excess of $300 million per quarter by the end of 2009.
Given the current global slowdown and difficult credit conditions, we agree with the company’s focus on cash generation. Terex is working aggressively to manage its costs, inventory, receivables and working capital in order to generate strong cash flows. Also, the company suspended share buybacks. Given the uncertainty in the credit markets, we believe it is important for the company to maintain adequate liquidity.
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