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Wednesday | 11 October, 2017 | 9:56 am

Heavy equipment

By Corinna Petry

Above: A Komatsu truck and a Hitachi mining excavator are employed at Fort Hills Oil Sands project in Alberta.

Rise of the machines // Despite political turmoil, orders and backlogs reflect improving global end-user demand

CONTENTS   
> AEROSPACE
> AUTOMOTIVE
> COMPUTERS + TELECOM
> CONSTRUCTION
> DEFENSE
> ENERGY
> HEAVY EQUIPMENT
> TRANSPORTATION

 

October 2017 - Executives at makers of agricultural, forestry, mining, construction, utility and other pieces of heavy equipment sounded surprised to find a turnaround in sales and bookings through the first half, and several raised their earnings guidance for the year. Let’s break their outlooks down by sector.

During Caterpillar Inc.’s second-quarter call, Group President and CFO Brad Halverson described construction equipment order rates as strong, with all regions realizing an improvement year over year.

“In order to call a recovery in mining, first, excess machine inventory in the mines would need to be worked off. Then, demand for overhauls and maintenance would drive higher aftermarket parts sales. And last, orders for new equipment would start to increase. The cycle is starting to play out,” Halverson told investors. “Utilization on trucks is up 4 percent from last year. The parked fleet continues to come down.”

Moline, Illinois-based Deere & Co.’s J.B. Penn, senior advisor, office of the chairman, told shareholders that for global agricultural equipment, “Food demand remains very robust; with the forecast for another abundant crop, the fundamental outlook is for more of the same.”

Citing a U.S. Department of Agriculture global supply-demand estimate, there has been “a turnaround in U.S. farm income” this year, and farmers’ capital purchase patterns are returning now that used equipment inventories have eased off their highs. Deere saw 30 to 40 percent increases in its order book for certain equipment types.

Although “geopolitical turmoil and political uncertainty continues to be the business backdrop,” Penn says, “the global agricultural economy this year is an improvement over last year and next year is expected to be marginally better yet again. Global food and agricultural trade is still growing despite sluggish GDP growth, but the prospects are better for 2018 and 2019. The long-term global tailwinds are with us.”

Oshkosh Corp., which makes utility and special-purpose trucks (among other types of equipment), reports that the fire and emergency truck segment backlog grew at the end of the second half. “Fleets continue to age. This projects well for the fire truck market, as replacement demand will need to increase,” President and CEO Wilson R. Jones said.

“The access equipment backlog [boom lifts, telehandlers] was up nearly 40 percent, driven by improved rental equipment market conditions in North America,” Wilson continued. “Utilization rates are solid. The European access equipment market remains solid and the Asian market continues to grow, driven by ongoing [new] product adoption.”

Jones cited “strong backlogs” in the commercial truck segment. “Longer term, we believe there are significant opportunities, driven by positive domestic construction forecasts, infrastructure potential and housing expansion. Each of these should be positive for our commercial product lines.”

Terex Corp., which makes material handling, crane, lifter, utility and construction mobile equipment, reports higher backlogs in each segment. Through first half, “Our backlog grew 36 percent and bookings grew 17 percent,” said President and CEO John Garrison. Demand in some sectors was “stronger than forecast.”

“In North America, stable oil prices, increasing rig counts and construction growth are leading higher utilization rates, which is stabilizing the market. Globally, cranes bookings grew 26 percent and backlog grew 29 percent. Material processing backlog is up 33 percent and will remain a big contributor going forward,” Garrison predicted.

Across North American and Western Europe, he concluded, “We’re not seeing a precipitous falloff in any market activity.”

For Manitowoc Co. Inc., which makes large cranes for construction, mining and other heavy industries, global crane demand remains “muted” due to low global growth and energy capital spending. “However, we believe the long-term outlook for the markets we serve remains positive,” said President and CEO Barry Pennypacker.

The company reported increases in both orders and backlog (9 percent and 25 percent, respectively) through first half, and Pennypacker mentioned signing a new multiyear military supply contract that calls for deliveries to begin this autumn.

“Global market sentiment for lattice boom crawlers and rough terrain cranes remains soft; weak rental and used equipment prices in the Americas and Middle East recite the simple fact that there’s frankly too much iron out in the field right now,” Pennypacker commented. On the bright side, “we have seen pockets of growth in specific markets within North America, such as the Permian and Eagle Ford basins [oilfields]. European markets continue to show modest growth, underscored by [construction] activity.”

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