By Bob Tita
Terex Corp. (TEX) lowered its profit outlook for 2013 on Monday
as machinery manufacturers' growth assumptions for the year collide
with weakening demand throughout the world.
The announcement came as analysts caution that it's too early to
call an end to the machinery market expansion that began in 2009
after the end of the 2008 financial crisis. But demand for
bulldozers, cranes, mining equipment and other machinery appears to
have stalled, at least temporarily.
Manufacturers were counting on accelerating demand this year
after a sluggish second half of 2012 stemming from lethargic
economies in the developing counties and anxiety in the U.S. about
the federal budget and the presidential election.
"I'm not sure things have gotten worse this year, they just
haven't gotten much better," said Barclays analyst Andy Kaplowitz.
"Growth rates now look a little bit more challenged than coming
into this year, but it seems more like of a lull, rather than the
end of the business cycle."
Connecticut-based Terex said it now expects to earn between
$1.90 and $2.10 per share this year, compared to $2.40 to $2.70 a
share previously. The company forecast second-quarter per-share
earnings in a range of 50 cents to 70 cents. Wall Street analysts
had been expecting the company to earn 82 cents a share.
The company said markets for its construction machinery and
canes used in factories and at ocean ports has been weaker than
anticipated during the second-quarter. The company said its
construction crane business also has been disappointing.
Demand for Terex's other product lines, which include
self-propelled work platforms and machinery to process aggregate
materials, has held up, but is not strong enough to offset the
weakness occurring in the companies' other business lines.
"The level of sales growth has softened overall for Terex when
compared with the increases we originally anticipated for 2013,"
said Chief Executive Ron DeFeo in a written statement.
Terex's reliance on sales from overseas markets also hasn't
helped the company lately. Terex derives about 69% of its annual
sales from outside the U.S., including about one-third from Europe.
Terex increased its exposure to Europe with its 2011 purchase of
Germany's Demag Cranes AG. Demag makes cranes and hoists used in
factories and warehouses, but Europe's dismal economic conditions
are holding down demand for Demag's gear.
"Their timing wasn't ideal," said Adam Fleck, an analyst for
Morningstar Inc. about Terex's purchase of Demag. "They bought it
right before the European industrial market really started to
crater."
Terex's stock ended Monday's regular trading session down, 7.7%,
or $2.45, at $29.29 a share.
"The global economy lost some of its steam and that's been
hurting some of these companies," said Michael Jaffe, an analyst
for Standard & Poor's Capital IQ.
Caterpillar Inc. (CAT) said Friday it will lay off one-third of
its production workforce in Wisconsin due to falling demand for
mining equipment. About 260 workers will be placed on indefinite
layoff starting June 24. Caterpillar acquired the assembly plants
South Milwaukee, Wis., and Milwaukee as part of its $8.8 billion
purchase of mining-equipment manufacturer Bucyrus International
Inc. in 2011. The Peoria, Ill., company also has announced layoffs
at its Decatur, Ill., assembly plant where its giant mining trucks
are built.
Sales of mining equipment propelled Caterpillar's performance
after the financial crisis when sales of company's earth-moving
machinery remained sluggish. But demand for mining machinery has
dropped in recent months as mines scale back on investments in
equipment because of lower prices for mined commodities, such as
iron ore and copper.
--Write to Bob Tita at robert.tita@dowjones.com
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