TEX
#Competitive pricing dynamics are very important.
I can't comment on competitors' behavior, one way or the other.
But I can say that our job is to make sure that we are focused on the marketplace and balancing supply and demand.
We also, as I said in my opening comments, we are a capital goods business.
Strategically, pricing really is the upfront ---+ from a customer's perspective, is the upfront cost.
It is the cost to operate and it's the value of the used equipment at the end of the cycle.
So we need to make sure that in our pricing activities we're not disrupting that balance, if you will, from our customers.
So we're going to compete aggressively but prudently in these difficult times.
Your delegation of authority gets a lot tighter, and you reduce less authority down for the sales team, and you hold that higher up in the organization to make sure that if you do have to reduce pricing, it is for a good, strategic reason.
And so those are the steps that we have taken as we go forward.
Again, supply-demand balance is very important in capital goods, and we're going to focus on making sure were not over supplying in the marketplace.
Yes.
So there is pressure in the back half, given the volume drop, which is the primary driver.
We don't see decrementals getting to 50%; that is part of the discipline we've got to bring to the business.
I think Matt and the team are focused on cost to keep our decrementals at a reasonable level as we get through the rest of this replacement cycle.
So no, we're not seeing 50% as a go-forward number.
Let me answer the question ---+ and thanks for the question ---+ let me answer it backwards.
In terms of the footprint, obviously the Waverly plant closure was an example of rationalizing our manufacturing footprint.
We will be looking at other opportunities to consolidate manufacturing of our Cranes business.
In terms of the market ---+ the North American market, especially on rough terrain cranes and the boom truck products ---+ it's really at levels we saw in the 2008 and 2009 timeframe.
It is clearly at a trough in the cycle.
There is an overhang of rough terrain cranes that was in the oil and gas sector, and so that overhanging has to work through the system.
I would also say, that is a similar comment in the Middle East for us on rough terrain cranes, in terms of the focus on the oil and gas.
As construction remains relatively stable in North America and starts to pick up in Europe, we did see an increase in sales in Europe in the first half of the year, and we're seeing some orders in the second half of the year for our all-terrain cranes.
In terms of where we are from a peak standpoint, we are significantly below the previous peaks.
And when I say significant, in many cases it is 50% or more below our previous peaks in the cycle.
So again, North America, Middle East, and the other areas we're seeing dramatic falloff in our Cranes business ---+ and we talked about it a little bit on the last earnings call ---+ was our business down in Australia.
Our pick and carry business.
A great business, but that market virtually has gone to zero in the market from a $200 million.
So as commodities recover, oil and gas stabilizes ---+ I don't know what price it is going to stabilize at ---+ but as it stabilizes, that is going to help to drive the demand cycle back in Cranes.
But in terms of area of where we are in several markets around the world, we are at the 2009-type levels.
Over the course of time, the next couple of years, I don't think it will be a rapid snap-back money, stretch your imagination.
But as things firm up, we can expect to see growth in the Crane side of our business.
Yes, that is absolutely fair.
As we get to later in the year and much closer to the sales of the MH&PS business, we will be looking to schedule an Analyst Day where we walk through in greater clarity the steps that we are taking and what we believe it will end up being as we go forward.
Because obviously there is a significant amount of change in this quarter, and we need to get the analyst community up to speed with the actions we're taking.
We can anticipate doing that later in the year, as we get closer to the MHPS sale.
Yes.
In terms of the MHPS sale, really what's going on now are the antitrust filings.
In the EU, Phase I was filed a couple weeks back.
We anticipate to hear back from the EU authorities here by August 8.
The process is ongoing in the United States for antitrust and (inaudible).
So that process continues.
The shareholder vote for Konacranes will be in mid-September.
There is not a shareholder vote required for Terex, but there is for Konecranes, and that will occur in mid-September.
And again, driving towards an early 2017 close of the transaction.
Good morning, <UNK>.
Thanks, <UNK>.
As we look at it, I think the backlog is a good indicator of what we see the second half being, with the backlog being off about 22%.
In terms of the orders and sales, what we are seeing is North America and Latin America: Latin America is off significantly, with Brazil being off.
So North America is off, Latin America is off, Europe ---+ we are actually seeing some good growth, and we saw some decent growth in the Asia-Pacific markets, so we expect that to continue in the second half of the year.
As you know, it's a very seasonal business, so the back half of the year is traditionally much lower than the first half of the year.
Again, the team is managing the orders closely, in constant contact with customers, to understand where customers are, in terms of their order placement.
And then adjusting the production to those demand forecasts.
The S&OP process, Matt and the team have had to accelerate that, if you will, or do it more consistently, given the dynamics in the marketplace.
So that's why we see the second half being what it is.
We think the backlog is a good indicator; and again, the North American market is our biggest market, and it is down.
And South America is completely down.
And Europe and Asia-Pacific are not enough to offset it.
So that is basically as we see it from a global perspective.
I think right now, I would say mix is pretty standard.
I think we've said in the past, it kind of goes booms, scissors, and telehandlers.
In my comments, I did speak to geographical mix.
With sales being up in Europe, pretty considerably, and doing a really good job in Europe, we do not enjoy the same level of profitability for FX reasons and other reasons in Europe that we do in North America.
So the geographical mix is also weighing on as a headwind to our overall margins.
Yes, we do believe the competitive position of business can improve.
We had not done a great deal on our product development efforts, and we allowed some of our products to become stale, if you will.
And <UNK> and the team have attacked that with some new product introductions and product upgrades.
When we are in the market with a Demag brand and the Terex brand with updated products, our customers are interested in buying those products.
And so we do believe, yes, there has been share erosion, that's never a good thing; but we do believe that we can gain some of that share back with the right products, the right service offerings, and the right competitive position from a pricing standpoint.
That is what we're focused on as a team.
Yes, <UNK> will take that.
So thanks for the question.
We're showing an MHPS loss of $39 million.
What's really driving that is an impairment.
We took a write-down in the period because the sale the transaction on net assets of $55.6 million.
We actually had a small operating profit in the period, but there's a lot of noise going on because of the discops accounting that is required.
All-in, operationally, the business was about a small operating profit versus the $39 million negative that you're seeing in the financials.
Thank you.
Just a clarify, that would be in my comments, when I said the optimal capital structure.
So in that analysis of what is the optimal capital structure, obviously the debt and equity piece will be the critical determinant.
We are looking at different structures for the business going forward, and as part of that, obviously the debt will be a significant contributor to that capital structure.
We are in the process of defining that optimal structure as we go forward.
Yes.
As we said, debt reduction will be part of that plan.
The level of debt reduction, the level of share buybacks, are all what we're working on between now and the close.
Thank you for your interest in Terex.
As you can see, there is a tremendous amount going on as we transform and position the Company for the future.
We understand in this quarter there is a lot of complexity in terms of the changes to our reporting financial statements.
So please, reach out to <UNK> and the team with your questions, so that if there is any confusion, we can get the confusion resolved.
Again, we understand the tremendous amount of change in the quarter, so we're sure there's lots of questions, and so please reach out to <UNK>, and <UNK> will address your questions.
And again, thank you for showing your interest in Terex.
