Terex May Cut Stake in ‘Struggling’ China Venture, CEO Says
Terex Corp. (TEX), a U.S. maker of construction equipment, said it may cut its stake in a “struggling” Chinese truck-crane joint venture or look for alternative partners after sales were lower than expected.
Sichuan Changjiang Engineering Crane Co. is “struggling a little bit,” Chief Executive Officer Ron DeFeo said yesterday on a conference call. Chinese truck-crane demand fell in the second quarter, the company said. It “may be better” for Westport, Connecticut-based Terex to own less than 50 percent of the venture, he said in a telephone interview.
“Whatever it takes to strengthen the joint venture, we would consider,” DeFeo said in the interview.
“The joint venture partners’ interests and our interests aren’t always aligned,” he said. “When those interests don’t align, sometimes the business doesn’t always perform at the level you’d like. That’s what has happened here.”
Terex dropped 11 percent in New York trading yesterday. Second-quarter profit excluding a gain on the sale of Bucyrus International Inc. shares and excluding charges related to Terex’s crane business and the acquisition of Demag Cranes AG were 10 cents a share, the company said July 20 in a statement. That missed the 18-cent average estimate of 19 analysts in a Bloomberg survey.
Terex purchased its stake in the venture in 2006. It can’t buy the other 50 percent under Chinese law, DeFeo said. The rest of the venture is currently owned by private Chinese investors, according to Terex.
“It may be better for us to own less than 50 percent,” DeFeo said. “We will evaluate that down the road. If there was a different partner that owned the other 50 percent or 55 percent or whatever, that would be very important to us.”
“You want to get the right owner, someone who wants to build the business and has a long-term view,” DeFeo said. “If we could change that, that would be of interest to us.”
DeFeo declined to comment on whether Terex is involved in any talks with other Chinese investors.
Terex fell $2.89 to $24.32 at 4:15 p.m. in New York Stock Exchange composite trading, the lowest closing price since May 28, 2009.
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