Terex announces job cuts after tough quarter

Terex announces job cuts after tough quarter
Slow container traffic growth hit demand for Terex's port equipment

After a loss-making start to the year, Terex is to cut 670 jobs across all segments in a bid to produce annualised cost savings of US$60m.

Of the total, 40% will be realised in 2016 while specifically 7% of jobs in selling, general and administrative (SG&A) expenses will be lost.

As much as US$30m per year in savings is to come from the port solutions segment where Terex president and CEO, John Garrison, wants to improve profitability.

He stated: “We have initiated a broad-based restructuring program in the quarter to reduce our SG&A costs and align production capacity with demand.”

Terex’s material handling and port solutions (MHPS) business made an adjusted operating loss of US$12.2m while the overall business suffered a first quarter loss from continuing operations of US$5.6m on an adjusted basis.

Adjustments were made for after-tax charges totalling US$59.7m related to severance and restructuring actions, as well as US$8.9m related to ongoing merger and acquisition activities.

In a conference call with investors, Garrison stated: “Lower growth rates in global container traffic are impacting sales of our port solutions business.”

Sales in the MHPS segment were down by 7.7% to US$317.7m, with half the decline due to foreign exchange rates.

Adjusted for currency, sales were up in Europe for all units except port solutions. Meanwhile, “a large port deal” in India was the primary reason for 14% growth in company-wide adjusted Asia-Pacific sales.

“Of the customer segments at Bauma [trade fair in Germany], the Indian customers were perhaps the most buoyant,” he remarked. “They believe that there’s going to be some funds released for major infrastructure projects.”

“Latin America in general, Brazil especially, has been a very difficult market across all business segments,” he added.

According to Garrison, customers are not postponing purchases due to Terex’s potential merger but rather, the slowdown in container traffic growth has made ports around the world content to “get by” with existing equipment.

As for the merger, Terex’s board still recommends a tie-up with Konecranes rather than Zoomlion although discussions with the Chinese company are ongoing.

Garrison highlighted several “critical issues” over the Zoomlion deal that still need resolving including the certainty of Zoomlion’s financing, Zoomlion’s shareholder approval, government approval and the amount of a reverse breakup fee.

On the Konecranes merger, Terex is working towards achieving the antitrust, regulatory and shareholder approvals that are required to complete the transaction.