In 2012, capital goods and agriculture equipment manufacturers all over the world faced a tough time producing and selling their products due to higher interest rates and declining customer demand. With the global economy now showing gradual signs of improvement, interest rates are easing off and demand is increasing. This comes as a huge relief for manufacturers.
Here are three equipment manufacturers which, due to their global presence, are expected to perform better this year than in 2012.
A company showing its huge presence
On June 2, 2013, the US Department of Defense awarded several contracts worth a total of around $950 million. Out of this, Terex Corporation (NYSE:TEX) was awarded contracts worth $327.5 million for its cranes segment. Under this contract, Terex will sell “commercial-type cranes” to the U.S. Army, Navy, Air Force and Marine Corps for a period of five years that ends on May 30, 2018. These commercial-type cranes will be delivered in Virginia, Iowa, and South Dakota in the U.S., and in Italy, France, and Germany as well. The contracted price of $327.5 million is hedged against inflation, so there is no downside risk to the contract price. This contract will contribute 4.4% annually to the total profits of the company’s crane segment for the next five years.
Terex Corporation (NYSE:TEX)’s aerial works platform, or AWP, segment reported a revenue increase of 21% on a year-over-year basis in the first quarter of 2013. The main reason behind this increase was a strong demand in its equipment renting channel. Terex Corporation (NYSE:TEX)’s AWP segment rents scissors lifts and telescopic booms. Consumer behaviour has trended toward equipment rental rather than equipment purchase, and there is an indication of a strong future prospect for Terex Corporation (NYSE:TEX)’s AWP segment. The AWP segment is expected to generate revenue of $2 billion in 2013, which is an increase of 15% on a year-over-year basis.
Cranes segment to lead the way ahead
In January 2013, Manitowoc Company, Inc. (NYSE:MTW) and Shantui Construction Machinery entered into a joint venture to build mobile cranes in China for the Chinese and global. Initially the joint-venture will produce four cranes, namely GT8, GT10, GT20 and GT25. These cranes will be sold through the existing dealer’s network of Shantui and Manitowoc Company, Inc. (NYSE:MTW) in China. The joint venture will also have the exclusive dealership rights of Grove All-Terrain and Rough Terrain cranes in China. This will diversify Manitowoc Company, Inc. (NYSE:MTW)’s cranes portfolio and will increase its presence in the global market. It is also expected that this joint venture will result in the exit of Manitowoc’s previous partner, Tai’An Dongyue Heavy Machinery. The exit of Tai’An Dongyue will increase Manitowoc Company, Inc. (NYSE:MTW)’s earnings before interest and tax by $20 million annually.
Manitowoc Company, Inc. (NYSE:MTW) reported sales of $547.4 million in its crane segment for the first quarter of 2013, showing a growth of 7.8% on a year-over-year basis. This increase in sales was because of the sustained increase in demand for cranes from the North American region as well as in emerging nations. Going forward, it is expected that the company will report sales of $2.35 billion in 2013 and $2.60 billion in 2014. This comes on the back of the company’s strong order backlog, which was $776 million as of Mar. 31, 2013. Another positive side effect of the increase in infrastructure activities in North America and emerging nations is that Manitowoc Company, Inc. (NYSE:MTW) looks well-positioned to capitalize on this growth and its order-book looks likely to improve.