TEREX CORP Q4 FY2024 earnings call

Management Statement and Operational Highlights

• Welcome and Thanks: Simon welcomes everyone, thanks Julie Beck for her three years of service, and welcomes Jennifer Kong as the incoming CFO.
• Safety Performance: Improved safety performance in 2024, with a commitment to safety and Terex values continuing in 2025.
• Financial Performance: Full year earnings per share were $6.11 on sales of $5.1 billion, the second highest in Terex's history. ESG performed well, adding to the portfolio.
• Segment Breakdown: ESG is now part of the Environmental Solutions segment, with ~25% of revenue from waste/recycling, ~20% from infrastructure, ~10% from utilities, and less than a third from general construction.
• Product Innovations: New Genie slab scissor, Heil electric refuse collection body, and Green-Tec brush chipper were highlighted as examples of innovative product introductions.
• Global Outlook: Macro headwinds from elevated interest rates and Fed outlook uncertainty, but positive on infrastructure spending, new administration focus, and global market opportunities.

Segment Performance

• AWP: Sales of $3 billion for the year, a 3% growth compared to 2023. Full year operating margin was 11.6%. Fourth quarter margins were impacted by aggressive production cuts, product moves, and unfavorable mix. The Genie team continues to optimize manufacturing and introduce new products.
• MP: Full year sales of $1.9 billion were 14.6% lower than the prior year due to industry-wide channel adjustments and challenging macroeconomic factors in Europe. Operating margin was 13.6%, impacted by lower volume and unfavorable product and geographic mix.
• ESG: Following the October 8 close, ESG achieved an operating margin of 21.9% on net sales of $228 million, with EBITDA of $51 million (22% of sales). Operational initiatives contributed to margin expansion.

Guidance

• 2025 Outlook: Expect net sales of approximately $5.4 billion, with a segment operating margin of about 12% and EBITDA of roughly $660 million. Interest and other expenses are expected to increase. EPS is anticipated to be between $4.70 and $5.10. Free cash flow is expected to be between $300 million and $350 million.
• Segment Specifics: AWP sales are expected to be down low-double digits, MP sales down high-single digits, and the ES segment to have mid-single digit sales growth, combining ESG and utilities.

Risks

• Macroeconomic Variables: Elevated interest rates and uncertainty around the Fed outlook, impacting rate-sensitive private projects.
• Geopolitical Uncertainties: International trade policy, potential tariffs, and their impact on manufacturing and sales, with mitigation plans in place but uncertainties remaining.

Question and Answer

Q: Jerry Revich asks about ESG margin sustainability and tariff impact.

A: Simon states ESG is 'firing on all cylinders' with strong bookings and performance, and Terex has optionality to mitigate tariff impacts by rerouting demand and using multiple facilities.

Q: Steven Fisher asks about AWP order trends and Europe momentum.

A: Simon says AWP is returning to normal patterns with strong Q4 and Q1 bookings, and Europe is expected to remain soft in 2025 with some bright spots like cranes in certain markets.

Q: Tami Zakaria asks about ESG outlook and first quarter EPS.

A: Julie explains ESG includes utilities, with strong backlog but constraints on utility supply, and first quarter EPS is expected to be ~10% of full year due to lower volumes in AWP and MP segments.

Q: Steve Volkmann asks about AWP cycle and Europe momentum.

A: Simon mentions 2025 is focused on replacement demand in AWP and soft Europe market, with mega projects as a tailwind if interest rates improve.

Q: Jamie Cook asks about ESG accretion and tariff pricing.

A: Julie confirms ESG is on track for accretion, and Simon states Terex aims to mitigate tariff impacts by staying disciplined on pricing and using optionality in manufacturing.

Q: David Raso asks about ESG margins and legacy decrementals.

A: Julie and Simon explain ESG margins are expected to be consistent, and legacy segments have decremental margins within targets, with first quarter impacts being a 'speed bump'.

Q: Mig Dobre asks about MP demand and tariffs.

A: Simon notes MP has strong forward visibility and aging fleets, with Europe soft but US showing upside, and Julie mentions MP margins will be consistent with Q4 in Q1.

Q: Kyle Menges asks about ESG margins and EBITDA guidance.

A: Julie confirms ESG is on track for synergies, and the 660 million EBITDA guide is an adjusted number.

Q: Tim Thein asks about ESG customer mix and technology leverage.

A: Simon states no meaningful change in ESG customer mix in 2025 and mentions potential leverage of 3rd Eye technology across Terex's portfolio