Terex Focus on Specialty Products Positions it for Further Growth

CEO Ron DeFeo made it clear in a CONEXPO press conference that Terex is not your typical construction equipment company. “Never wanted to be. Don’t plan to be,” he states. “We want to be a specialty product company and focus on areas where we can be a market leader.”

This encompasses what he defines as “lifting and material handling solutions” for Terex customers. The company’s product portfolio covers earthmoving equipment, material processing, lift equipment (cranes and aerial work platforms), material handlers and port solutions. Until recently, it also included heavy off-road trucks (articulated and rigid frame). This product line is being divested in a sale to Volvo, announced last December, which is expected to close in the second quarter of this year.

“We think it’s a good portfolio decision, but frankly a tough portfolio decision for me,” DeFeo comments. “But we were no longer planning to build the truck business. We see the sale as a good portfolio decision for us and a good move for Volvo.”

New Volvo President Explains Why Volvo CE Bought Terex Trucks

Slow Climb Back to the Peak

The combination of its various product segments has enabled Terex to build upon its revenue growth, with expectations for further growth moving forward. Revenue in 2013 rose to roughly $7.1 billion from about $6.98 billion in 2012. While an improvement, it remains well below the peak achieved prior to the Great Recession.

Terex Expects 2013 Sales Improvement to Continue in 2014

“There is tremendous potential still in this company and a lot of upside,” says DeFeo. “We have global reach and our portfolio is positioned for growth.”

Despite setbacks stemming from political issues such as the fiscal cliff, the company is well on the way to recovering lost ground in the U.S., Canada and Mexico. “In North America, we’re coming back. We’ve seen 24% growth since 2009,” says DeFeo. “We’re on way up in North America. We’re nearly back to performance levels achieved in 2008.”

On a global scale, the company has further to go. “Terex, revenue performance wise, is still far from our last peak. Our revenue level in 2013 was only 65% of our last peak. We think we have at least another 35% growth in our business,” DeFeo asserts. “There is still a lot of potential still in front of us.”

For 2014, DeFeo expects North America and Europe to be the strongest markets for the company. Although the recovery in the U.S. housing market remains generally weak, there are precursors indicative of a nonresidential construction recovery. Specifically, he notes the architectural billings index remains north of 50, which indicates improvement. “Housing is showing signs of early recovery,” he adds, “which is a good indicator of the early stages of recovery [for nonresidential.]”

To capitalize on this potential, Terex continues to evolve to meet the needs of a changing marketplace. “What Terex was is far different from what we are today, for sure,” DeFeo muses. “One of the challenges in this industry is we don’t have a network that can quickly change perceptions overnight. We are not your father’s or grandfather’s motor grader company anymore… Today, we are an over $7 billion company with diversified products. We’re a specialty equipment company.

“One of the magical things about being in this business,” he continues, “is you can reinvent yourself.” For Terex, this included acquiring over 60 companies over the years, bringing it to the company it to the diversified organization it is today.

“Terex has reinvested in itself,” says DeFeo. This investment is currently generating 8% to 9% return on capital for the company. But DeFeo is not satisfied. “We can be better,” he states.

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