Terex (US:TEX)2021-07-30 23:11Financial Data and Key Metrics Changes - Terex Corporation reported overall revenues of $1 billion for Q2 2021, a 50% increase year-over-year, with operating profit rising to $123 million from $7 million in the same quarter last year [26][27] - The operating margin improved to approximately 12%, reflecting disciplined cost control and increased production despite supply chain challenges [27][28] - The company achieved a free cash flow of $101 million in the quarter, contributing to a year-to-date total of over $140 million [14][40] Business Line Data and Key Metrics Changes - Aerial Work Platforms (AWP) segment sales reached $595 million, up 44% year-over-year, with bookings of $747 million, nearly tripling the backlog to $1.4 billion [30][31] - Materials Processing (MP) segment sales increased by 67% to $441 million, with an operating margin above 16% and backlog more than tripling to $868 million [32][33] Market Data and Key Metrics Changes - The global market for access equipment is experiencing a multi-year replacement cycle, with increasing demand for non-residential investment and strong order activity [21][22] - Demand in the utility business is robust, driven by tree care, rental, and investor-owned utilities, alongside strong growth in parts and service [23] Company Strategy and Development Direction - The company is focused on executing, innovating, and growing, with plans to maintain SG&A as a percentage of sales below 12.5% for the full year [15] - Terex is investing in both organic and inorganic growth opportunities, including acquisitions to localize production in China and expand product offerings [18][20] Management's Comments on Operating Environment and Future Outlook - Management acknowledged ongoing supply chain disruptions impacting production schedules but expressed confidence in the team's ability to manage these challenges [65][66] - The company expects continued end market strength and a strong third quarter, although operating profit in the second half of 2021 may be lower than the first half due to rising commodity costs [36][37] Other Important Information - The company has a strong liquidity position with over $1.1 billion available and no near-term debt maturities, allowing for continued investment in growth [44] - Terex is committed to maintaining a disciplined capital allocation strategy while focusing on improving cash flow and balance sheet strength [96] Q&A Session Summary Question: Discrepancy between backlog and expected sales - Management indicated that most of the backlog discrepancy is due to supply chain disruptions affecting production schedules [55] Question: Cost pressures and future pricing - Management acknowledged inflationary material cost pressures and indicated plans to achieve price-cost neutrality in 2022 [58][59] Question: Supply chain constraints and production stoppages - Management confirmed that while there have been no absolute plant shutdowns, some value streams have been temporarily halted awaiting parts [66] Question: Strategic priorities and M&A focus - Management highlighted a focus on disciplined capital allocation and pursuing inorganic growth opportunities, particularly in the MP and utility sectors [97] Question: Pricing dynamics in the competitive environment - Management noted rational pricing dynamics in North America and Europe, while indicating aggressive pricing competition in China [114] Question: Free cash flow generation and sustainability - Management emphasized a target of over 100% of net income for free cash flow generation, with a focus on maximizing cash flow every year [123]