Release Date: October 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Terex Corp (TEX, Financial) successfully completed the acquisition of ESG, which is expected to be financially accretive from day one and add approximately $40 million in EBITDA in the fourth quarter.
- The company reported earnings per share of $1.46 on sales of $1.2 billion for the third quarter, demonstrating strong execution despite industry challenges.
- Terex Corp (TEX) maintained a strong balance sheet post-acquisition, securing funding at favorable rates and terms.
- The Monterrey facility is performing well, providing a competitive advantage with its low-cost manufacturing structure.
- The company's backlog remains elevated at $1.6 billion, indicating strong future demand and order visibility.
Negative Points
- Net sales for the third quarter were down 6% compared to the same period last year, primarily due to lower volume in the MP segment.
- The European market remains weak, impacting the MP segment's performance and contributing to lower sales.
- AWP margins were affected by unfavorable product mix and higher freight costs, with production adjustments not fully offsetting volume reductions.
- The company anticipates a degree of caution in rental demand through the fourth quarter and into 2025, affecting short-term growth.
- Geopolitical concerns and macroeconomic uncertainties, including interest rate fluctuations and the upcoming US election, are leading to deferred local projects and cautious customer decision-making.
Q & A Highlights
Q: With the first production cut of a downturn, should we expect decremental margins to normalize around the low 20s range as we move into next year?
A: Julie Beck, CFO: Yes, AWP margins will be impacted in Q4 due to lower production rates. As we enter 2025, we will adjust production and trend back to our normal decremental targets. Simon Meester, CEO: We've taken channel adjustments in both MP and AWP, and with ESG's addition, we're comfortable with our 25% decremental incremental target for 2025.
Q: Can you update us on the Monterrey transition and its impact on cost savings given the demand declines?
A: Julie Beck, CFO: Monterrey is performing well, and we're pleased with the supply chain and team. We'll transition more products to leverage the low-cost structure. Although some benefits are offset by unfavorable conditions elsewhere, Monterrey will be a competitive advantage for us.
Q: Can you provide insights on the ESG backlog and how it is trending?
A: Simon Meester, CEO: ESG's backlog is strong, typically running on a six-month cycle. Their book-to-bill has been over 100% for the last four to five quarters, setting us up well for 2025. The business is competitive in quickly turning backlog for customers.
Q: What is the visibility on the timing of ESG synergies going into next year?
A: Julie Beck, CFO: We've kicked off integration with good planning. We expect $25 million in run rate synergies by the end of 2026, with some starting in 2025. We'll provide more details in our Q4 year-end call.
Q: Regarding revenue guidance, was the softness anticipated since the September preannouncement?
A: Julie Beck, CFO: We're within the margin of our updated outlook from September, with no major deviations. Simon Meester, CEO: We're being prudent, and the outlook remains consistent.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
