Off-Highway Research
March 2003: Issue 254
CONTENTS
Page
UK TRACTOR MARKET GREW BY 21 PER CENT IN 2002
1
HITACHI ACQUIRES SHAREHOLDING IN UK DEALER
2
JAPANESE CONSTRUCTION EQUIPMENT SHIPMENTS FALL IN 2002
2
PUBLIC WORKS SET TO STAGNATE IN FRANCE IN 2003
3
FIRST EXCAVATOR LEAVES HITACHI’S NEW FACTORY
5
BITELLI EXPANDS UNDER CATERPILLAR OWNERSHIP
6
BAURENT OF GERMANY ANNOUNCES EXPANSION STRATEGY
7
SPANISH CONSTRUCTION MARKET STILL STRONG IN 2002
9
WAY INDUSTRY INCREASED PRODUCTION OF SKID-STEER LOADERS
10
FINANCIAL RESULTS
FIRST QUARTER
 DEERE – USA
11
ANNUAL
 AGCO – USA
13
 ATLAS COPCO – SWEDEN
14
 CNH – NETHERLANDS
15
 CUMMINS – USA
16
 FINNING INTERNATIONAL – CANADA
17
 TEREX – USA
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UK TRACTOR MARKET GREW BY 21 PER CENT IN 2002
Registrations of agricultural tractors in the UK in 2002 reached 14,037 units, an increase of
20.5 per cent over 2001. This might surprise those who have listened to stories of woe from the
farming community and seen the pictures of the havoc wreaked by Foot and Mouth disease
(FMD) in 2001 in the livestock sector.
Distressing as the outbreak was, it did result in very large amounts of compensation being paid to
the farmers affected. To the livestock sector it had the effect of converting their animals into
cash earlier than would otherwise have happened and the amount of money paid over inevitably
meant that farmers could spend on new machinery. Many decided to return to the livestock
business with their systems reorganised to produce more efficiently, with better feed production
and handling systems.
At the same time, the cereals producers continued to invest to reduce operating costs, in view of
low product prices. In their case they are often looking at reducing manpower at the same time
as purchasing larger machines for the workers they want to retain. For the first time for many
years the average tractor size bought went down in 2002, from 119 to 118 horsepower, reflecting
the fact that a substantial part of the market lay with the livestock farmers, who do not need such
large tractors as their cereal producing counterparts.
The improvement in tractor sales began in September 2001 and by the spring of 2002 the
monthly figures showed increases up to 80 per cent, compared to a year earlier. This was also
ascribed at the time to better milk prices but clearly the one-off FMD payments were the main
factor. By September 2002 the market was back to the level of 2001 and in both October and
November it was below the previous year. In other words, the boom is over.
The forecast for 2003 depends on how much each commentator is impressed by the soaring sales
of September 2001 to September 2002. Some believe that there is still some money left over to
spend and predict tractor sales at 13,000 units; while others assess the situation as having
returned to normal, with a descent to 11,500 units being likely.
By arrangement with the European Commission, the UK’s trade association, the AEA publishes
the market share figures for the agricultural tractor market with one year’s delay. The 2001
figures have therefore just become available and are reproduced below.
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Table 1. UK: Suppliers of Agricultural Tractors and their Market Shares, 2000-2001
John Deere
New Holland
AGCO (incl. Massey Ferguson + Fendt)
Case IH (incl. Steyr)
Renault
Valtra
JCB
Others
2000
Units
3,246
2,505
1,524
1,726
435
394
263
1,082
Total
11,175
%
29
22
14
15
4
4
2
10
100
2001
Units
3,302
2,637
2,184
1,591
461
507
300
1,467
12,449
%
27
21
18
13
4
4
2
12
100
Source: AEA
HITACHI ACQUIRES SHAREHOLDING IN UK DEALER
It has been announced that Hitachi CME has acquired a 30 per cent shareholding in HM Plant, its
dealer in the United Kingdom and Ireland. HM Plant was the subject of a dispute between
Hitachi and Fiat Kobelco for its services, the decision being finalised in a court judgement in
December. (See December 2002 Market Report)
Hitachi is the largest shareholder in the company, ahead of the Bank of Scotland, after the
management buy-out of the company in 2000. This move strengthens the commitment of HM
Plant and Hitachi to one another. Hitachi has undertaken a similar deal in Italy with its newly
appointed importer, who was previously one of the major Fiat-Hitachi dealers in the country.
The practice of acquiring shares in their dealers is not unusual for Japanese companies and is
very common in Japan. After the uncertainty over HM Plant’s franchise in the UK and Ireland,
the new announcement will be well received by existing and potential customers. The UK is a
vital market for Hitachi. In 2002, HM Plant sold over 1,000 Hitachi and Fiat-Hitachi machines
and, with the UK being one of the few markets in Europe not experiencing a downturn in
demand, it is useful in the short term that Hitachi has a solid and reliable importer. HM Plant and
its forerunner, BM Plant, have represented Hitachi products for almost 30 years and in the future
will be an important support for Hitachi’s new operation in Europe.
JAPANESE CONSTRUCTION EQUIPMENT SHIPMENTS FALL IN 2002
Japanese construction equipment shipments fell by 3.7 per cent in 2002, compared to 2001, the
sixth consecutive year of decline. The domestic market was dire, taking 19.2 per cent less but
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exports went up 24 per cent because of improved performance in Europe and North America.
The table below shows some of the trends but it should be noted that the CEMA classes are
somewhat broad and that the table is in money terms, not units.
Perhaps the best that one can say is that the decline was not as bad as in 2001, when shipments
sagged by more than 10 per cent. The hydraulic excavator has once again asserted itself as the
saviour of the industry, with exports rising by 35 per cent, so that it alone accounted for 42 per
cent of the money made from export sales in 2002.
Table 2. Japan: Shipments of Construction Equipment by Type, 2002
(¥ Billion; % Versus 2001)
Crawler Dozers/Wheeled Loaders
Hydraulic Excavators
Mini Excavators
Cranes
Road Machinery
Concrete Machinery
Tunnelling Machinery
Foundation Machinery
Hydraulic Breakers And Crushers
Other Construction Equipment
Parts
Domestic
Value % Change
68.2
-26
160.2
-26
52.0
-25
79.4
-16
33.0
-11
20.2
-28
32.8
2
12.9
-20
12.0
-18
44.5
-12
108.1
-19
Export
Value % Change
101.6
21
226.0
35
47.5
12
22.6
48
12.5
-14
2.9
171
5.4
19
0.3
-66
7.5
-11
42.4
48
64.4
-
Total
623.4
533.1
-19
24
Source: CEMA
PUBLIC WORKS SET TO STAGNATE IN FRANCE IN 2003
The trade association of the French public works industry has published its annual assessment of
the business and forecast for 2003. After a year marked by a widespread slowing of activity
(with a few exceptions) in 2002, the industry is expecting a poor but not disastrous year in 2003.
The construction equipment market slowed up in 2002 and the figures below suggest that 2003
will see another fall in sales to the industry and its supporting services such as rental.
2002 showed a negative result mainly because the local authorities slowed up the pace of
contract awards in a year with many elections that changed the composition of the ruling
councils. The central state budget was frozen in mid-year and so its spending slowed in the
second half. Public enterprises such as the gas and electricity monopoly EDF/GDF, France
Telecom and the toll motorway companies kept up their spending on public works.
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Table 3. France: Turnover in Public Works 2001-2003
Local Authorities
Public
Enterprises
State
Private Sector
Total
2001
2002
(€ Millions)
12,089
5,058
Change
(%)
-2.5
3.0
2003
Pessimistic Optimistic
Forecast
Forecast
(%)
(%)
1.0
3.0
4.0
6.0
2,186
9,897
-4.5
-4.5
3.0
-8.0
4.0
-5.0
29,230
-2.5
-1.3
1.0
Source: Off-Highway Research
A similar pattern of different fortunes in each sector emerges in the forecast for 2003.

The local authority spending should rebound and the two forecasts differ between a scenario
that makes up for all the ground lost in 2002 and one that suggests that the recovery will
hardly come at all. Public transport projects, such as those in Bordeaux and Toulouse, should
lead the way but there is a fear that a change in the financing of the lowest level of authority,
the communes, may hold up again the programme to bring sewage collection systems and
processing plants up to European norms.

The public enterprises’ forecast is so positive because of the high value of the LGV East, the
name given to the high speed railway line east from Paris towards Strasbourg and Germany
(first phase estimated at €3,300 million, opening in 2007). The total will again develop
positively in 2003 but not in work for the debt-laden France Telecom. The big projects of the
railway and the new port extension at Le Havre, costing €640 million in its first phase, will be
responsible, as will a certain amount of increased maintenance works on the toll motorways.

The state froze its budgets in the second half of 2002 and logically 2003 would show a large
growth if spending were resumed.
Unfortunately the government announced another
spending freeze for early 2003 at the time of the FNTP’s press conference, without saying
how much freeze there would be and where. The freeze in 2002 meant 23 per cent less
spending on roads and surface transport.
Theoretically the 2003 budget was set to be
three per cent lower in roads and five per cent lower in surface transport, compared to the
original plan for 2002.

The private sector, on the other hand, has exhibited a loss of confidence that is bound to pull
down the value of its contribution in 2003. As it fails to invest in new commercial or
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industrial building, so it leaves companies that provide power or water to those cancelled
projects without work. Private sector work also includes work provided to subcontractors by
others in the industry and after a massive surge is set to fall back somewhat.
FIRST EXCAVATOR LEAVES HITACHI’S NEW FACTORY
The new Hitachi factory in Amsterdam saw its first assembled machine leave the production line
at the end of January. The 21 tonne excavator bound for the UK market will be the first of
thousands to leave the new facility over the next few years. Off-Highway Research visited the
new factory in January and Hitachi’s European operation will be the subject of a company profile
to be published in April 2003 as part of the European Service.
The new factory in the western docks area of Amsterdam, 20 minutes from the city centre and 15
minutes from Schiphol airport, is a very impressive facility. The 18-hectare site is in a newly
developed industrial area to the west of Amsterdam. Currently the site has a large factory
building of 29,000m2 and a technical and demonstration centre that covers 4,500m2, of which
1,500m2 is office space. The offices are the new centre of Hitachi’s operations in Europe. The
domestic sales operation remains at its current site in Oosterhout. However, the site affords
plenty of room for further expansion at a later date should that be deemed necessary.
The factory will assemble the completely new Zaxis crawler and wheeled excavator range. The
mini excavator will continue to be built in Oosterhout, a one hour drive south of Amsterdam,
which is the original site of Hitachi Construction Machinery Europe. The wheeled loaders are
currently built at the former Furukawa factory in Genas, near Lyon in France.
The new factory will be capable of building 3,500 machines per year, utilising a single shift
system. It has the potential to double capacity should demand dictate by operating an additional
night shift, although it is not thought the factory will be operating at full capacity until later in the
year.
In the meantime, Hitachi is importing fully assembled machines from Japan.
The
machines are shipped to Amsterdam and off-loaded from the ships very close to the factory,
where PDI inspections and any specification changes are undertaken.
The new site has given Hitachi a major presence in Europe that its dealers and customers will be
able to utilise fully. The service and demonstration facilities are state-of-the-art and its close
proximity to the airport will enable Hitachi to use it as a marketing exercise almost on a daily
basis.
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The factory currently employs 75 people but when it is fully operation, this figure is expected to
rise to 150. A further 300 people work at the two Oosterhout facilities.
BITELLI EXPANDS UNDER CATERPILLAR OWNERSHIP
Table 4. Bitelli: Model Range and Production, 1997-2002
(Units)
Tandem Rollers
Self-Propelled Rollers
Combination Rollers
PTRs
Asphalt Finishers
Cold Planers
Emulsion Spreaders
Vibrating Plates
Model
Range
8
4
1
1
15
10
1
1
Total
1997
500
190
5
35
285
140
150
50
2002
600
120
5
35
360
140
100
100
1,355
1,460
Source: Off-Highway Research
Bitelli, the Italian road making equipment manufacturer purchased by Caterpillar in May 2000,
has benefited substantially from Caterpillar’s technical and business expertise in the last three
years.
The company operates under the brand name of Bitelli and in 2001 achieved its highest recorded
turnover, €78.7 million, an increase of 55 per cent compared with 1997. Much of this growth
was achieved in the fast expanding domestic market with sales accounting for just over 30 per
cent of turnover. Overall sales of compaction equipment in Italy increased 25 per cent in the five
year period to 2002 and Bitelli was able to achieve a market share of some 26 per cent. The
company has also recorded increased activity in France, Spain and South Africa.
The asphalt finisher range has recently been extended to eight wheeled and seven crawler models
in the 3 to 18 tonne weight class, all with a hydraulically extended screed width from 0.25 to
13 metres. Bitelli’s performance in the growing domestic market was particularly impressive in
2002, where it managed to retail almost 150 units in a sector that totalled 320 units. Europe
remains a strong market, with the United Kingdom, Ireland, Finland and Sweden being the best
destinations in 2002. Sales outside Europe have grown strongly in the last few years, mainly in
China and the Middle East. The company has also established liaison offices in Moscow,
Bombay and Bangkok.
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BAURENT OF GERMANY ANNOUNCES EXPANSION STRATEGY
BauRent, one of Germany’s longest established construction equipment rental companies, has
announced its intention to expand its presence in the market significantly. The company, based
in Cologne, was founded in 1983 by the two senior staff of Blackwood Hodge Germany, part of
the now defunct British construction equipment organisation, and was initially run along the lines
of a British-style plant hire business. As pioneers of the rental concept BauRent found it hard to
gain immediate acceptance, although the company began to fare much better after 1990.
In 1994 the company was acquired by Itochu, the Japanese investment and trading house, which
was previously the owner of the business importing Furukawa construction equipment from
France. Itochu wanted to advance in a major way into selling and renting of construction
equipment in Germany. It then bought into some smaller operations further east, put money into
the company and made it into one of the largest companies in the industry.
The latest announcement from BauRent details its intention to concentrate on its core sectors, the
expansion of its depot network and further investment in its rental fleet. Expansion from its
original bases in Cologne and Krefeld was initially steady, although in the aftermath of
reunification the company was quick to exploit the potential offered in the New Federal States.
The network now comprises 20 branches on a national basis:

Hamburg

Krefeld

Erfurt

Hannover

Düsseldorf

Dresden

Berlin-Schöneiche

Cologne

Frankfurt

Berlin-Elstal

Olpe

Mannheim

Magdeburg

Bonn

Stuttgart

Dortmund

Halle

Munich

Essen

Leipzig
BauRent currently employs some 170 people, but this figure is likely to increase with the
implementation of the recently announced expansion plans. Around half of the staff are assigned
to service based activities, an unusually high percentage for the rental sector, but a situation
which BauRent believes is an essential prerequisite in an increasingly customer orientated
industry. Quality technical service is what the company believes sets it apart from its major
competitors and BauRent mechanics are now on call for emergencies during the evenings and, if
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necessary, night.
In contrast to some of its competitors, too, the company is resolved to
confining its activities to pure rental rather than get involved in the distraction of selling new
construction equipment.
Table 5. BauRent: Construction Equipment Stocked, 2002
Machine
Wheeled Excavators
Crawler Excavators
Mini Excavators
Wheeled Loaders
Crawler Dozers
Skid-Steer Loaders
Telescopic Handlers
Mobile Compressors
Compaction Equipment
Types
Under 10.0 tonnes: Schaeff, Macmoter, Atlas Weyhausen.
13-21 tonnes: Atlas Weyhausen, Caterpillar, Furukawa
10 to 50 tonnes: Komatsu, Caterpillar, Furukawa
Caterpillar, Hanix, Komatsu
<80 hp: Atlas Weyhausen, Volvo, Caterpillar
>80 hp: Atlas Weyhausen, Furukawa, Caterpillar, Volvo
Caterpillar
I-R Bobcat
Manitou, JCB
Atlas Copco, Ingersoll-Rand, Irmer & Elze
Bomag. Vibrating plates also from Delmag
Source: Company Information
BauRent concentrates almost exclusively on earthmoving machinery rental and is particularly
active in the heavy equipment sector. More recently the company has expanded its product
offering to include generators, compressors and ancillary equipment such as demolition
hammers. Company policy dictates that the rental fleet comprises equipment exclusively from
established manufacturers, who are able to offer the requisite levels of service and parts support.
The number of machines in the rental fleet, which BauRent does not divulge, has remained
relatively constant in recent years despite the increased number of depots. This is largely due to
the fact that all rental stations are linked by computer to optimise utilisation of the fleet.
Machines are renewed in line with regular replacement programmes and currently around 20 per
cent of the entire fleet is sold off on an annual basis.
The concept of rental in Germany continues to evolve. Some suppliers feel that up to 30 per cent
of new machine sales now go to form rental fleets, as opposed to about 10 per cent in the late
1980s. The value of the rental market itself has grown significantly in the last ten years and for
the more professional construction equipment dealers it represents about 20 per cent of their
turnover.
Having been confined to compact machinery up to the early 1990s, rental is now making
demonstrable progress in several larger machine sectors.
The standard sizes of hydraulic
excavators are appearing, as are articulated dump trucks and crawler dozers, where the dealer
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happens to have a franchise for them. What is needed now is a major advertising campaign in its
favour but also a trimming of the service to something which the refined West German customer
will appreciate. That means that the future lies in the direction of services, not merely of
availability of the machines at rental outlets of indiscriminate quality.
A question frequently posed with regard to the future development of rental is whether a return to
a healthy construction economy in Germany might herald a trend away from rental and back to
ownership.
Off-Highway Research believes that this is now highly unlikely given the
increasingly widespread acceptance of the concept. The mould has been broken, old prejudices
banished and there is a genuine realisation of the inherent benefits of the concept.
Several observers have expressed surprise that acceptance of the concept has taken so long in
Germany, given its popularity in two of Europe’s largest construction equipment markets, the
UK and France. It is clear, however, that future development of the rental market will be led
exclusively by the specialist companies, and that their focus on total customer care will be to the
detriment of less professional outfits.
The rental market will, therefore, continue to grow, albeit at a reduced rate. Development of
rental in the New Federal States will stagnate in the short term, and medium term growth will
take place primarily in West Germany. The future market is likely to be the subject of increasing
dominance by professional rental companies, although manufacturers’ involvement in rental will
also increase as they attempt to respond to the strength of Caterpillar dealer Zeppelin’s rental
operation.
SPANISH CONSTRUCTION MARKET STILL STRONG IN 2002
As most construction equipment markets in Europe slowed in 2002, Spain did not. Sales were
unexpectedly firm in the second half of 2002 and it is necessary to look to the construction
industry to explain it.
In 2002 GDP grew by 2.0 per cent, slowing from the rate of 2.7 per cent seen in 2001 and
certainly lower than the frenetic pace of 2000, when exports grew by 10 per cent and household
spending by a real 5.0 per cent. 2002 was a more moderate year, with household spending
growing by 1.8 per cent but construction hardly slowing at all. It became the motor of the
economy in 2002. The growth in value added by construction stayed high, at 4.6 per cent (2000
– 6.4 per cent; 2001 – 5.4 per cent).
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The healthy state of the industry comes from work in both housing and public works. House
building activity changed speed in 2002 and it is necessary to recognise that it has slowed during
the year and presents a much less optimistic picture for 2003. The number of houses being built
(and therefore providing work for rental and contractors’ own machines) was up five per cent in
the middle of the year but new housing orders fed through much more slowly. Figures are
provisional but it seems that the year’s total will be at least 12 per cent lower than 2001.
Public works activity was approximately four per cent higher than 2001 in the middle of the year
(the latest period for which data is available). The full year figures will probably show growth at
about this level, as we already know that cement consumption was up by 4.6 per cent in the first
11 months of the year and that of steel long bar by 5.1 per cent. This sustained level of work
pushed machines to the end of their lives and created enough profits for the machine owners to
justify replacement in 2002.
For 2003, the picture is mixed. New public sector contracts announced have gone very well,
especially in the second half of 2002, promising work during 2003 and the first months of 2004.
The first nine months of 2002 show an increase of 7.5 per cent in new public works contracts
announced, although this is moderated by a 1.5 per cent fall in state sector contracts for new
building. Housing, on the other hand, is decidedly in a downward phase for 2003, for the simple
reason that private households have spent heavily on it already and cannot afford to take out
more credit. Spain is a country where buying is the norm, not renting, so news from the Bank of
Spain that new mortgage activity was only 0.9 per cent up in mid-2002 shows that consumers
have run their credit to the maximum.
WAY INDUSTRY INCREASED PRODUCTION OF SKID-STEER LOADERS
Way Industry from Slovakia, best known for production of Locust skid-steer loaders, is going
from strength to strength and has doubled its production from 200 units in 1999 to over 400
machines in 2002.
The company, which has been manufacturing skid-steer loaders since 1981 – under the name of
ZTS Krupina – was privatised in 1996, and it is now owned by a group of businessmen from
Slovakia.
The current range of two Locust models in the 750 and 1,200 kilogramme rated capacity, was
updated in 2000 and features Yanmar – not locally made Lombardini – diesel engines and
Rexroth hydraulic componentry.
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The Czech market, which exceeded 500 units in 2002, is still the best for the company and the
Locust 752 accounts for more than 90 per cent of sales. Other good markets included Hungary
and Slovakia while exports to the former Soviet Union, which in the past were running at the rate
of over 1,000 machines per year, have now been reduced to single units. In 2002 the skid-steer
loader market in Russia was dominated by Bobcat and topped 200 units.
Table 6. Way Industry: Sales of Skid-Steer Loaders by Country, 2000-2002
(Units)
Czech Republic
Slovakia
Hungary
Algeria
Australia
Russia
Latvia
Poland
China
Others
Total
2000
145
51
44
3
1
11
1
2001
166
63
55
12
5
1
4
8
4
8
2002
211
65
54
32
8
7
6
3
21
256
326
407
Source: Company Information
In the last three years, Way Industry has begun to export skid-steer loaders to Algeria, Australia
and China and there are plans to launch a strong promotion of its machines in Western Europe.
A new range of skid-steer loaders is to be introduced at the Intermat 2003 trade fair in Paris.
FINANCIAL RESULTS
FIRST QUARTER
DEERE – USA
The first quarter of 2003 has seen a pronounced improvement in Deere’s performance. The
company reported a net income of $68 million compared to a loss of $38.1 million in the
corresponding period last year.
It reported strong improvement throughout the company
reflecting the new products launched and increasing financial discipline within the company.
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Table 7. Deere: Financial Highlights, First Quarter, 2002-2003
($ Millions)
3 Months
Ended January 31
2002
2003
Net Sales & Revenues
Agricultural Equipment
Commercial & Consumer Equipment
Construction & Forestry Equipment
Other
1,180
358
387
13
1,271
483
512
8
Total Net Sales
1,938
2,274
584
520
2,522
2,794
Credit and Other Revenues
Total Sales & Revenues
Operating Profit(Loss)
Agricultural Equipment
Commercial & Consumer Equipment
Construction & Forestry Equipment
Other
(15)
(43)
(66)
113
6
23
16
111
Total Operating Profit (Loss)
(11)
156
Net Income (Loss)
(38)
68
Source: Company Information
Farm machinery sales in the first quarter were up by eight per cent in 2003, whilst a similar rise
was seen in production volumes. Sales were up in Europe reflecting the appeal of new products
and a stronger exchange rate for the Euro. Sales to North America declined while the value of
sales to Latin America declined due to the weaker value of the Brazilian currency. In 2002, the
value of first quarter sales had been adversely affected by the devaluation of the Argentinean
Peso. Despite the reduced level of demand in North America, Deere expects agricultural sales to
grow between seven and nine per cent worldwide.
Commercial and consumer equipment sales are up 35 per cent, whilst production volumes have
doubled. The growth has been slightly exaggerated by the poor results in 2002 when company
inventories were being drastically reduced.
Construction and forestry sales and production grew by 32 per cent in the quarter. The sales in
2003 also benefited from the inclusion of the Deere-Hitachi marketing relationship in North
America. Without the inclusion of the Hitachi relationship overall sales in 2003 in this sector
were expected to decline.
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ANNUAL
AGCO – USA
Table 8. AGCO Corp.: Financial Highlights, Fourth Quarter, 2001-2002
($ Millions)
Net Sales
Net (Loss)/Income
3 Months
Ended December
2001
2002
772.9
843.7
23.2
(82.0)
12 Months
Ended December
2001
2002
2,541.5
2,922.7
22.6
(84.4)
Source: Company Information
Although turnover in the last quarter of 2002 was nine per cent up on 2001 and for the full year it
achieved an increase of 15 per cent, AGCO recorded a net loss for both periods. In 2002 it
closed its Coventry, UK agricultural tractor manufacturing and in the last quarter it recorded a
sum to allow for its position with regards to its US tax credits. Changes in accounting principles
and payments under the long-term incentive scheme for senior executives also had a negative
impact on the final declared profit.
Sales rose in 2002 in Europe and South America and AGCO also added turnover from the
acquired lines of Ag-Chem and the Challenger tractors bought from Caterpillar. The gross
margins improved from 17.1 to 18.2 per cent as a result of improved utilisation of the Hesston,
Kansas plant, increased production and the impact of adding Ag-Chem’s higher margin business
to the corporate total.
AGCO sold more agricultural tractors and combine harvesters in North America in 2002 and in
Europe and South America farm tractor sales were up. Sprayers were down on 2001, because
drought hit some areas of the USA and farmers were concerned over the possible effects of a new
farm bill.
The outlook for 2003 is seen as stable. The new farm bill has helped in North America, as have
higher commodity prices. While the effects of drought are still being felt and some US farmers
have worries about transitional payments, the market should improve modestly as the year
progresses. Europe should remain level after the improvements in 2002 but Brazil may fall back
as credit will probably not be available in the same way in 2003 as last year.
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AGCO sees its income increasing by eight to ten per cent in 2003, thanks to revenues from the
Challenger lines, the recently purchased Sunflower brand of tillage, seeding and harvesting
machinery, and other new products and from the strengthening of the euro.
ATLAS COPCO – SWEDEN
Table 9. Atlas Copco: Financial Highlights, 2001-2002
(SEK Millions)
12 Months
Ended December
2001
2002
Revenues
Compressor Technique
Construction & Mining Technique
Industrial Technique
Rental Service
Eliminations
16,873
7,253
12,126
15,469
-582
15,993
7,618
11,481
12,829
-359
Total
51,139
47,562
Operating Profit
Compressor Technique
Construction & Mining Technique
Industrial Technique
Rental Service
Corporate Items
3,202
736
1,123
1,255
-186
3,005
680
1,050
686
-160
Total
6,130
5,261
Profit after Financial Items
4,700
4,481
Net Profit/(Loss)
3,067
(3,889)
Source: Company Information
Revenue fell by seven per cent in 2002, corresponding to a three per cent fall in volume, and the
effect of the weakening dollar being translated into Swedish Krona. The profits were seriously
affected by a goodwill impairment charge of SEK6,950 million but, excluding that item, the
profit margin after financial items actually improved in 2002 from 9.2 to 9.4 per cent of sales.
The fourth quarter was notable for particularly bad news from the Rental Service division, based
almost entirely in North America. Total revenues decreased 24 per cent to SEK2,884 (3,776)
primarily due to a very large negative translation effect from dollars to Krona of 13 per cent and
a drop of more than half in sales of used equipment. The drop in used equipment sales came as a
result of the active fleet restructuring efforts in the same quarter last year. Rental revenues were
down by one per cent and rates achieved were flat. The fleet utilization remained well above the
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level in Q4 2001, with more fleet on rent than last year in spite of the reduction in total fleet size
and the decrease in market demand. 14 stores were closed in the quarter and the number of rental
locations at the end of the period was 506 compared to 530 one year earlier. The number of
employees was reduced by 568 in 2002 and purchases limited to obligatory fleet renewals only.
Construction and Mining Technique reported an increase in order intake at the end of 2002.
Poor construction market conditions in most regions except the Middle East, Australia and parts
of Asia, continued to depress the sales of portable compressors during 2002 but generator sales
picked up somewhat at the end of the year. A completely new range of small and medium-sized
oil-free compressors was launched recently, employing innovative technology in the compressor
elements to make them more efficient and quieter than the old range.
CNH – NETHERLANDS
Table 10. CNH: Financial Highlights, 2001-2002
($ Millions))
3 Months
Ended December
2001
2002
12 Months
Ended December
2001
2002
Net Sales and Revenues
Agricultural Equipment
Construction Equipment
Financial Services
1,532
704
184
1,646
765
185
6,073
2,957
739
6,405
2,926
641
Total Sales and Revenues
2,413
2,586
9,715
9,940
1,009
782
155
290
1,034
946
143
288
4,197
3,168
587
1,078
4,140
3,317
638
1,236
North America
Western Europe
Latin America
Rest of World
Net Income (Loss)
Agricultural Equipment
Construction Equipment
Financial Services
(12)
(11)
48
52
(45)
58
105
13
93
201
(159)
122
Total
20
60
188
154
Source: Company Information
CNH reported consolidated sales and revenues of $9.94 billion in the full year of 2002, an
increase of three per cent over the same period in 2001.
After all changes in accounting principles and restructuring charges, the net loss for the year was
$25 million in 2002, compared with a loss of $155 million in 2001.
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Agricultural Equipment: Sales for the year improved by five per cent to $6.1 billion, with
strong gains being posted in Brazil and Asia, while sales of combines in Europe were up
substantially.
Net profit in this sector improved strongly to $201 million in 2002, compared with $105 million
in 2001.
Construction Equipment: Sales for the year declined by a single per cent to $2,926 million, but
a profit of $13 million in 2001 was translated into a $159 million loss in 2002.
CUMMINS - USA
Table 11. Cummins Inc.: Financial Highlights, 2001-2002
($ Millions)
12 Months
Ended December
2001
2002
Revenues
Engines
Power Generation
International Distributor
Filtration & Other
Eliminations
3,121
1,422
562
889
-313
3,435
1,226
574
951
-333
Total
5,681
5,853
Earnings/(Loss) Before Interest And Income Taxes
Engines
Power Generation
International Distributor
Filtration & Other
Total
Net Profit/(Loss)
(209)
76
26
65
40
(28)
29
87
(42)
128
(102)
73
Source: Company Information
Sales increased by three per cent for Cummins in 2002.
Three out of the four divisions
performed at or above expectations but power generation continued to be a problem area.
Unfortunately the year was bound to finish badly for the engines business because the 1 October
deadline for the new US emissions standards had encouraged many buyers to purchase units
ahead. The volumes shipped in the quarter declined by 20 per cent compared to the third quarter
of 2002.
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Sales improvement in the filtration business came from market share gains in North America,
Europe and the Middle East in both original equipment manufacturers and aftermarket segments,
as well as key international markets in Asia and the Pacific Rim.
The International Distributor Business saw strong financial performance from distributors
located in all regions of the world, including China, Singapore, India, Dubai, South Africa,
Belgium, Brazil and Chile. The problem area of the Power Generation Business Unit suffered
from the effects of a severe drop in its principal markets in 2002. As a result, Power Generation's
profits fell from $81 million in 2001 to a loss of $27 million in 2002.
Cummins shipped 331,900 engines in 2002, compared to 311,900 in 2001, with almost all the
improvement being attributed to its mid-range engines.
FINNING INTERNATIONAL - CANADA
Table 12. Finning International: Financial Highlights, Fourth Quarter, 2001-2002
(C$ Millions)
3 Months
Ended December
2001
2002
Sales
New Mobile Equipment
New Power and Energy
Systems
Used Equipment
Equipment Rental
Operating Leases
Customer Support Services
Finance & Other
12 Months
Ended December
2001
2002
290
68
244
52
896
238
825
192
79
180
21
230
3
78
190
21
261
2
356
691
96
956
13
330
745
88
1,019
9
Total
869
848
3,247
3,208
Net Income
27.8
31.2
103.9
132.3
Source: Company Information
A decrease of eight per cent in new equipment sales brought from Finning year-end figures that
were mainly creditable in areas such as asset productivity, geographical expansion (into
South America) and in the eight per cent growth of earnings from customer support services. The
turnover in the UK grew by three per cent to C$828.2 millions, while revenues at Hewden Stuart
increased by no less than 13 per cent (to C$665.3 millions) and it positioned itself for further
profit improvement by disposing of its tower crane business at the end of the year.
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Looking forward to 2003, the managers expect a modest economic recovery, combined with
further strategic initiatives that will enable Finning to deliver another year of strong bottom-line
performance.
TEREX – USA
Table 13. Terex: Financial Highlights, 2002-2003
($ Millions)
3 Months Ended
December
Net Sales
Construction
Cranes
Roadbuilding and
Utility Products
Aerial Work
Platforms
Mining
Total
Operating Profit
Construction
Cranes
Roadbuilding and
Utility Products
Aerial Work
Platforms
Mining
Total
Net Income (Loss)
12 Months Ended
December
2001
2002
2001
2002
168.3
88.7
106.1
278.1
267.4
136.8
732.7
473.9
365.5
1,195.5
700.8
562.4
-
96.2
-
116.7
82.7
74.7
266.1
282.9
445.8
853.2
1,838.2
2,858.3
8.7
3.4
7.9
14.0
7.3
6.6
57.7
34.7
28.1
74.7
39.0
35.4
-
6.8
-
8.9
4.1
(3.4)
18.4
2.4
24.1
31.3
138.9
160.4
1.6
(40.3)
12.8
(132.5)
Source: Company Information
Terex has announced a net loss for the full year of $132.5 million. The loss reflected special
items due to meeting the requirements of the SFAS and restructuring costs within certain
business units.
Terex Construction: Net sales increased $462.8 million. The increase was driven by an eight
per cent growth in core businesses while the addition of new acquisitions to the group has also
proved beneficial. The introduction of the Terex compact line has aided results in Europe, while
the backhoe loaders have increased sales in North America. The most successful group within
the sector is Powerscreen. The company is optimistic that results will improve this year as
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Schaeff is achieving expected performance, whilst cost reductions at Atlas are beginning to show
results.
Terex Cranes: The improved net sales reflect the acquisition of the Demag Crane operation but
also a seven per cent increase in its core business. The improved results were vastly helped by
the successful award of the US Marines Telehandler order, as well as the growth in the hydraulic
crane business in Italy. The North American crane market continues to be sluggish.
Terex Roadbuilding and Utility Products: The increased sales in 2002 were driven primarily
by the acquisitions of Advance Mixer, Pacific Utility and Telelect Southeast. Sales excluding the
acquisitions actually fell nine per cent with Cedarapids and the light construction businesses
worst affected.
Terex Aerial Work Platforms: This is a new business for Terex and the results reflect the
performance of Genie Holdings Inc and its subsidiaries since its acquisition in September 2002.
Terex Mining: 2002 was a difficult year for the mining business. The hydraulic shovel business
performed as expected but disappointing results from the dump truck business resulted in the
closure of the Unit Rig, Tulsa manufacturing facility. The cost improvements expected as a
result of the closure should be reflected in improved results in 2003.
Terex is characteristically upbeat about the future but believes any improvement will be as a
result of the integration of recent acquisitions and cost saving programmes recently implemented
rather than any improvement in market demand.
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