Demag Cranes Closes a Successful 2009/2010 Financial Year

Düsseldorf,   07. December 2010

  • Guidance Figures for Group Revenue and Group Operating EBIT Exceeded
  • Dividend to Be Paid Out Once Again: EUR 0.60 Dividend Proposed per Share
  • Order Situation Improves in Line with Global Economic Recovery: Order Intake Up 8.2 Percent
  • Group Revenue 11.1 Percent Down Year on Year also due to Late-cycle Industry Bias
  • Group Operating EBIT at EUR 54.2 Million
  • Restructuring Concluded – Annual Savings of Nearly EUR 60 Million Achieved
  • Refinancing Secured Ahead of Schedule – Net Debt Completely Cleared
  • Group Strategy Directed at Stronger Focus on Customer Needs and Increasing International Footing
  • Outlook: Significant Increase in Revenue and Earnings Expected in Coming
    Financial Years

Demag Cranes AG exceeded its targets for financial year 2009/2010. With Group revenue of EUR 931.3 million, the Company achieved a slightly higher figure than the around EUR 900 million forecast that the Management Board had communicated in the Interim Report for the third quarter of 2009/2010. Group operating EBIT of some EUR 54.2 million was also above the communicated range of EUR 45 million to EUR 50 million. As to be expected, while the first quarters of the financial year continued to feel the impact of the economic and financial crisis, the order situation has improved considerably, however, in the second half of the reporting period as the global economy recovered. Due to the late-cycle bias of our business, there is a delay before the positive order situation is reflected in revenue. That is why Group revenue was still 11.1 percent below the previous year’s figure.

In light of the positive business performance in the past financial year, the Management Board and the Supervisory Board have jointly decided to propose a dividend of EUR 0.60 per share at the Annual General Meeting for financial year 2009/2010. This puts the dividend payout ratio at some 42 percent of Group operating net income after tax. We are now able to return to our usual dividend policy after being forced to put it on hold temporarily during the financial crisis. In future, we intend to retain the same policy of distributing attractive dividends according to Group operating earnings. Demag Cranes AG’s CEO, Aloysius Rauen, summarises, “We have managed to close a successful financial year 2009/2010 despite the adverse effects of the economic and financial crisis. Thanks to notably decreased costs, ongoing expansion of our global footprint and our leading edge in innovation and technology, we are aiming for significant growth in revenue and earnings in the coming financial years.”

Order Situation Improves in Line with Global Economic Recovery
In financial year 2009/2010, the Demag Cranes Group generated order intake of EUR 910.6 million
(2008/2009: EUR 841.9 million), which corresponds to an increase of 8.2 percent. All segments contributed to this positive development. The Group order book stood at EUR 306.6 million as at 30 September 2010, which was down just very slightly on the previous year (EUR 313.1 million) after steady improvement in past quarters.

Order intake in the Industrial Cranes segment grew by 3.6 percent year on year to EUR 412.2 million. Following the steady increase in order intake during the financial year, the highest number of orders was received in the fourth quarter. In line with economic recovery and the highly positive order development in the mechanical engineering industry, our customers are also beginning to pursue more capital expenditure projects again. The Industrial Cranes segment order book came to EUR 180.0 million as at 30 September 2010 (30 September 2009: EUR 197.7 million).
The number of orders also increased in the Port Technology segment in financial year 2009/2010. Order intake increased by 29.7 percent year on year to EUR 197.0 million. Here too, the largest number of orders was generated in the fourth quarter. Growth was the result of increased demand for Mobile Harbour Cranes and services. The Port Technology segment order book came to EUR 76.9 million as at
30 September 2010 (30 September 2009: EUR 69.4 million).
In the Services segment, order intake increased by 3.2 percent to EUR 301.5 million. The increased use of crane systems pushed demand for our services. The order book stood at EUR 49.6 million as at
30 September 2010, after EUR 46.0 million in the previous year.

Group Revenue 11.1 Percent Down Year on Year also due to Late-cycle Industry Bias
Group revenue amounted to EUR 931.3 million in financial year 2009/2010 and was therefore 11.1 percent down on the previous year (EUR 1,047.6 million). Due to the late-cycle bias of our business, we generally benefit from any upswing with a delay of six to twelve months. Taking into account delivery times and billing terms, the positive trend in order intake, as expected, could not yet be fully felt in revenue for the period under review. The previous year’s Group revenue figure still included a high proportion of revenue from the sale of Process and Standard Cranes in the Industrial Cranes segment. While the orders for some of these cranes were received in financial year 2007/2008, the cranes were delivered to customers and the revenue booked in financial year 2008/2009 after an average manufacturing time of six to twelve months.

The segments were affected by the revenue decrease in financial year 2009/2010 in different ways:
In the Industrial Cranes segment, revenue declined by 19.3 percent to EUR 440.8 million (2008/2009:
EUR 545.8 million) due to the above-mentioned greater proportion of high-revenue Process and Standard Cranes in the previous year.
The Port Technology segment recorded a decrease in revenue of 6.9 percent to EUR 189.9 million (2008/2009: EUR 204.0 million), the previous year's revenue being higher due to deliveries and invoicing of Mobile Harbour Crane orders left over from record financial year 2007/2008. Furthermore, there was still a little revenue from our automated products in financial year 2008/2009.
At EUR 300.6 million, revenue in the Services segment remained almost unchanged from the previous year. However, revenue increased steadily over the course of the financial year, with the greatest quarterly revenue realised in the fourth quarter, when revenue from the refurbishment of crane systems in particular increased significantly.

Group Operating EBIT Down Year on Year due to Lower Revenue Volume
The Demag Cranes Group generated operating EBIT of EUR 54.2 million in financial year 2009/2010 (2008/2009: EUR 67.6 million).

As was to be expected, operating EBIT dropped by 83.8 percent to EUR 4.8 million in the Industrial Cranes segment. The year-on-year decline in operating EBIT is the result of significantly lower revenue. We achieved a key goal of our restructuring programme by lowering the break-even point to revenue of around
EUR 470 million in this segment.
In the Port Technology segment, operating EBIT increased from EUR -14.8 million to EUR 0.6 million in financial year 2009/2010. This very satisfactory development is particularly due to the restructuring programme through which we were able to significantly improve our cost base in the Port Technology segment and lower the break-even point to around EUR 200 million.
In the Services segment, operating EBIT declined by a marginal 3.1 percent to EUR 58.3 million. The prior-year figure of EUR 60.2 million was higher partly because we sold fewer high-margin spare parts in the first quarters of the financial year.

Restructuring Concluded – Annual Savings of Nearly EUR 60 Million Achieved
As at the end of financial year 2009/2010, we had mostly completed our restructuring programme as planned, thus achieving a significant reduction of the break-even points and annual savings of nearly EUR 60 million. Thanks to this implementation of this programme, we have navigated successfully through the economic and financial crisis and thus permanently boosted the competitiveness of the Demag Cranes Group.

Refinancing Secured Ahead of Schedule – Net Debt Completely Cleared
As communicated at the end of November 2010, Demag Cranes AG has secured its refinancing bank loans ahead of schedule, having signed a credit facility agreement for EUR 350.0 million with an international bank consortium. The agreement includes a flexible credit facility for cash drawings amounting to EUR 200.0 million and a credit facility for guarantees totalling EUR 150.0 million. Having arranged a term of five years, Demag Cranes has made long-term plans for its borrowing. By rigorously focusing on efficient cash and working capital management, we repaid net debt in full in financial year 2009/2010 and even achieved a net cash position of EUR 7.2 million. Free cash flow before financing and restructuring payments amounted to
EUR 25.0 million as at 30 September 2010.

Headcount Down Year on Year Due to Restructuring Measures – Group Integration under Way
As at 30 September 2010, the Group had a workforce of 5,711, of which 2,734 in Germany, 223 fewer employees as compared to the prior year. This reduction is to be ascribed particularly to implementation of our restructuring programme.
In financial year 2009/2010, we came one step closer to meeting our goal of fully integrating the Demag Cranes Group. As part of our restructuring measures, we successfully introduced our envisaged management structure in May of this year to tighten organisational integration of functions such as production, sales and services under unified management across the Group. Through this management structure, we have shortened decision-making processes considerably, reduced redundant functions and further improved efficiency in the Demag Cranes Group. This new organisational structure goes hand in hand with our corporate culture and integration project.

Group Strategy Directed at Stronger Focus on Customer Needs and Increasing International Footing
Focusing on our customers and their needs is a key element of our strategy. Foremost, we are concentrating on end-to-end solutions, i.e. on a holistic approach to meet the needs of our customers and not just on supplying individual product solutions. In this context, we are expanding the global footprint of our activities such as research and development into areas, e.g. China or India, that are the focus of our Company’s growth. These markets offer excellent opportunities to establish the Group in the mid-segment product range by offering solutions tailored to meet customers’ individual requirements. In China, we recently applied for the first Sino-German patent for a mid-segment rope hoist, a major achievement attributable to international teamwork with a clear focus on growth markets.

We uphold our commitment to maintaining our leading edge in technology and innovation. As our recent engineering achievements such as the battery-operated Automated Guided Vehicle or the hybrid drive for Mobile Harbour Cranes show, our key focus is on sustainable technology. With our global service network, an end-to-end range of services and the largest installed base of electric cranes and hoists worldwide, we have enormous business potential in the profitable service sector. We also aim to expand our service business for non-Demag crane-related products. Under its clear standalone strategy, Demag Cranes is primarily targeting robust business expansion in emerging markets by the launch of new product lines combined with significant growth in profitable service business. Our goal is to be number one in our industry in cash flow and profitability through organic growth and acquisitions.

Outlook: Significant Increase in Revenue and Earnings Expected in Coming Financial Years
Given the positive economic outlook, we expect to regain strong rates of revenue growth in the coming financial years. From today’s perspective, we aim to achieve Group revenue in the range of EUR 970.0 million to EUR 1.0 billion in financial year 2010/2011. No later than financial year 2012/2013, Group revenue is expected to re-attain the record level reached in financial year 2007/2008 (EUR 1,225.8 million). The new emerging-market product families are planned to deliver another sharp jump in revenues in financial year 2014/2015.

The changes in cost structure will also allow us once again to attain substantial improvements in operating EBIT. For financial year 2010/2011, we anticipate an operating EBIT margin slightly above the level attained in 2009/2010 (5.8 percent). In this connection, the expense of developing products for the mid-price segment will impact operating EBIT by an amount in the low double-digit million euro range. Subject to meeting the revenue target, we expect the Group operating EBIT margin to be back above ten percent as early as financial year 2012/2013. The operating EBIT margin is set to climb again sharply with significant planned revenue growth in financial year 2014/2015, partly because enlarging production facilities and building new ones close to our customers will mean that administrative and logistics costs will not rise as steeply as revenue.

About Demag Cranes

The Demag Cranes Group is one of the world’s leading suppliers of industrial cranes and crane components, harbour cranes and terminal automation technology. Services, in particular maintenance and refurbishment services, are another key element of the Group’s business activities. The Group is divided into the business segments Industrial Cranes, Port Technology and Services and has strong and well-established Demag and Gottwald brands. Demag Cranes sees its core competence in the development and construction of technically sophisticated cranes and hoists as well as automated transport and logistics systems in ports and terminals, the provision of services for these products and the manufacture of high-quality components.

As a global supplier, Demag Cranes manufactures in 16 countries on five continents and operates a worldwide sales and service network that is present in over 60 countries through its subsidiaries such as Demag Cranes & Components GmbH and Gottwald Port Technology GmbH, agencies and a joint venture. In financial year 2009/2010, the Group, with its 5,711 employees, generated revenue of around
EUR 931.3 million. Since the end of June 2006, the Demag Cranes share (WKN: DCAG01) has been listed in the Prime Standard of the Frankfurt Stock Exchange and is traded on various indices including the MDAX®.

Demag Cranes AG. We Can Handle It.


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This press release contains forward-looking statements relating to the business, financial performance and earnings of Terex Material Handling & Port Solutions AG and its subsidiaries and associates. Forward-looking statements are based on current plans, estimates, projections and expectations and are therefore subject to risks and uncertainties, most of which are difficult to estimate and which in general are beyond the control of Terex Material Handling & Port Solutions AG. Consequently, actual developments as well as actual earnings and performance may differ materially from those which are explicitly or implicitly assumed in the forward-looking statements. Terex Material Handling & Port Solutions AG does not intend or accept any obligation to publish updates of these forward-looking statements.

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