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TWST: What is Terex?
Mr. Gelston: Terex is the third largest manufacturer and marketer of
construction equipment worldwide. We compete in many of the major
construction segments, including construction equipment that you see
anywhere from residential construction sites to non-residential highway
construction. We make cranes, surface mining equipment and aerial lift
devices that are growing more and more in popularity due to their
efficiency on the job site. We compete in a pretty crowded space. Most
people would recognize our competitors, Caterpillar and Komatsu. We are
the third largest behind those two, and in the construction equipment
world, we are larger than Deere, Case New Holland, Ingersoll-Rand, and
on down the list. We have been a company that has grown substantially
over the years. One of the primary tools that we use for growth is
acquisitions. In 1995, starting with about $500 million in revenues, we
started a series of about 30 acquisitions and over the next seven years
grew the business to approximately $3 billion, primarily by using our
stock and our ability to add debt to our company, and became the third
largest at that point. Our growth since then has taken us to expect
revenues around the $7 billion range this year from 2003 levels of about
$3 billion. From 2003, our growth has been primarily organic, as we
begin to tackle markets globally. We are not a major player in Asia, and
that's becoming a primary focus, as well as the strong recovery in the
North American market. TWST: Give us an idea of how the parts fit together today. What are the
areas that have good strong fundamentals and good growth prospects? What
areas might be on the list where more attention is being paid?
Mr. Gelston: One of the hot spots right now in the global economy and
one of the strengths within our portfolio is the mining business. That
business was one that was weak in 1997 following the downturn of the
Asian economies, and remained at fairly low levels through the beginning
of 2004, when the business began to recover. One of the primary items
that our trucks transport and mine is iron ore, so a good sign for us
was the general global industrial recovery that has taken place because
the iron ore prices and all the other soft metals began to recover
sharply. So when you have the mining recovery as a leading indicator, it
begins to show a pretty positive backdrop. One of the swing factors that
led to the sharp increase for mining was the Chinese economy, which was
more an exporter of commodities such as iron ore and coal in 2003, but
later became an importer with the massive growth of their infrastructure
and their attempts to industrialize, or at least bring the western part
of their country into more modern times. A lot of the growth that we
have seen is driven primarily by the strong need to get energy and
commodities such as iron ore, nickel and copper out of the ground to
fulfill the global need, and it has caused a pretty rapid rise in
pricing. So mining was a good pre-indicator. The other thing is that the
North American market had been in a downturn since 2000 ' it was
extended a little bit because of the 2001 tragedies. It came back in
2004, with the lower technology equipment leading the charge in a
recovery, and as we move deeper into the North American recovery, we
expect to see the high dollar, later cycle equipment like cranes begin
to recover. So Aerial Work Platforms, which is a business that's been
going strong for us, and one that we acquired in 2002 under the Genie
brand name, recovered substantially to the point where we are now a mid-
teens operating margin business. It is at the highest revenue level it
has ever seen, and it should remain that way for the next year and a
half or two years, and possibly beyond. We have businesses like the
cranes business, which is primarily non-residential construction
related. One of the benefits it's getting is the massive need for
energy, so refinery rebuild and repair, as well as power plant
construction, windmill farms and bridge work, and then other non-
residential construction such as shopping malls and stadium projects,
and that seem to be driving the increase in demand, but that's a fairly
new event. So what we are seeing is probably one fiscal quarter or so of
positive results out of that business, and that business is typically a
10-year peak-to-peak business. We are looking at probably a good four or
five years of strong performance out of that group as we look forward
from here. All of the products that we have are generally interrelated
in the sense that they play in the global infrastructure environment.
They all play sometimes to different end-markets or customers, but the
dynamics that drive them tend to be related over a cycle.
Tickers included in this excerpt: TEX
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