In a continuation of last month’s Quarry and Aggregates (Q&A) Forum, Terex Materials Processing’s President Kieran Hegarty talked about various issues impacting the aggregates industry.
Rock Products: So how’s business? What is your take on the national economy and also on the construction economy? Is business better today than last year? Are steel tariffs impacting you? Which international markets are hot for you? What do you think of New U.S.-Canada-Mexico trade deal?
Hegarty: Terex Materials Processing is a high-performing segment within Terex Corp. with growth that is driven by global demand for our crushing and screening products, material handlers and broad line of environmental equipment. Our businesses continue to focus on introducing new products, and improvements to existing products, designed to address specific customer needs in these industries. We see the benefits in our increased sales, bookings and backlog – illustrated in our Q3 results, where we delivered excellent performance across our portfolio of businesses, with sales of $295 million – 14 percent higher than last year. With 72 percent higher backlog, we expect to hit the ground running in 2019.
As we buy steel in many forms, including raw steel and fabrications and indirectly in components, steel tariffs are of course impacting on us. The U.S. announcement of steel tariffs drove steel prices to levels not seen in many years – currently steel prices for the balance of 2018 are roughly 40 percent more than they were in the fourth quarter of 2017, when we set our 2018 prices. These added costs create unnecessary headwinds at a time when markets are trending well. While Terex is committed to continuously improving efficiency, managing costs, and when possible, protecting our customers from rising costs to help maximize the value and return on investment derived from our products – the impact of the rising cost of steel is too large and too sudden for us to absorb. We added a steel cost surcharge on our equipment to cover a portion of our cost increases – to remain separate and transparent from our base prices. If the price of steel normalizes, we will adjust or remove the surcharge.
Trade is important to our industry and a contributor to how we deliver value to our customers. Since the creation of the North American Free Trade Agreement (NAFTA), Terex has benefited greatly from duty-free access to Canada and Mexico. As for the new U.S.-Canada-Mexico trade deal, while it is better than having no trade agreement at all, it will take time for the full impact of the new deal to be made clear.
As a global manufacturer, we depend on trade to create markets for the products of our factories beyond the borders of the countries where those factories are located. Our industry is capital intensive – it takes major investment in plants and equipment to make the kinds of machinery that we produce. To get a good return in our capital-intensive business, you need access to bigger markets so that you can achieve the kind of scale that creates value for our customers. Restrictive trade policies like tariffs impede on our ability to do that. We believe in free and fair trade for the health of our industry and the benefit of our customers and team members.
RP: How is your business doing specifically in the aggregates industry? Are producers actively investing in new equipment this year, or planning for future capital improvements? What problems are you solving for aggregates producers?
Hegarty: The aggregates industry is thriving and creating an all-time high demand for our products. While our current range of crushers and screeners are performing well across all markets globally, we’re very aware that markets change and we need to offer solutions to changing market needs.
For example, we’re seeing that plants are getting bigger, as well as more capable. Many quarry operators and contractors are looking to produce greater volumes of final aggregate product, with fewer machines, therefore lowering production cost per ton. An obvious gap in our brands’ mobile plant range is in ultra-large crushers and screeners. We are working to fill this space and a couple of larger plant models, capable of processing 800 to 900 tonnes an hour of material depending on the feed, will hopefully be coming onto the market within the next 12 months.
To help quarry owners better cope with bigger production levels, the move to bigger crushers and screeners ties in with our move to bigger and longer conveyors. We have developed our conveyor range as the cost of using wheel loaders – such as the cost of diesel and operators to control them – has become extortionate. Our new tracked conveyor facilitates a higher stockpile, reducing the use of a loader so it is more cost effective for our customers. It equates to less downtime and more efficiency throughout the processing operation, as the loader can be employed elsewhere. It also improves site safety, through the reduction of loader and haul truck movements.
We also see huge potential in our EvoQuip range of compact crushers and screeners to meet end users who are working on smaller residential construction projects as well as plant and tool hire. Ten years ago there were just a couple of smaller players in the compact plant market. Now there are more and more contractors doing crushing and screening and we’re pleased that we now have a range to cater for that market.
Finally, we’re very aware that our machines are huge investments for our customers, so have invested heavily in telematics – technology that pulls data from their machines in the field that helps them make informed decisions about their fleet. In addition to regular reports on machine and fuel consumption, output production tonnages, GPS machine tracking, operating hours – all to help customers manage their fleet (particularly useful for contractors and plant rental companies), our telematics is tied into predictive maintenance, where customers can know when their machine is due a service or when parts may need replaced. With telematics, we work with our customers to maximize uptime and longevity of their machines and can make sure that we can have the right parts, at the right place, at the right time.
RP: President Trump promised $1 trillion in infrastructure funding, but so far that has not materialized. How confident are you that we will see a solid plan in the coming year? What do you base your answer on?
Hegarty: We’ve been a big supporter of the Association of Equipment Manufacturers’ (AEM) efforts to pass a long-term infrastructure-spending bill because we believe it would be good for the industry. A well-funded long-term infrastructure bill will certainly help Terex Materials Processing as well as the other Terex segments, since most construction requires processed aggregate as a building block for concrete and asphalt.
RP: A popular new book, and many national and international media reports, decry the dwindling supply of sand available to the construction market. Do you buy that? Do you have products or services designed to address a potential sand shortage?
Hegarty: The dwindling supply of sand as a construction resource has been well documented in the media for many years. Our observations in many markets around the world lead us to believe it is a very real situation that has the potential to become a crisis without the correct interventions and legislations being put in place.
We study the published statistics on sand consumption to understand how the demand environment is driving the issue. We know that sand is the most extracted natural resource in the world, second only behind water, so we study reports to try and quantify the global appetite. An example is China, where between 2011 and 2013 they alone consumed more concrete (of which sand is the primary constituent) than the United States did through the whole of the 20th century.
There are of course regional differences and some regions of the world are less effected. In Western Australia, there are still many deposits of high quality construction and industrial sands that require minimal processing. For most developed and developing regions across the globe however, the depletion of high quality reserves is very real and has driven efforts to establish new and innovative methods of producing construction grade sands and fine aggregates. Taking India as an example, historically most sand was dredged from rivers but in recent times, a government crackdown on the practice has led to a boom in manufactured sands where the sand is derived from crushed rock fines. In the UK and Western Europe, more and more construction, demolition and excavation waste material is being recycled into re-usable aggregates and sands through modern and innovative wet processing techniques.
Terex Washing Systems have a complete product range that is capable of processing natural/virgin sands but also in producing manufactured and recycled sands and aggregates. We see these particular segments as significant growth opportunities and part of our product development roadmap is the advancement of technologies to accomplish higher recovery rates of raw materials from complex waste streams.
When it comes to recycled aggregates and sands, one current impediment is around the acceptance of these products for use in high quality and structural grade concretes. We believe enhanced test criteria and the rapid development of applicable product standards are crucial in order to better define recycled aggregate characteristics and improve overall acceptance.
The growing shortages of natural sand in many regions around the world will continue to drive the latter and we believe Terex Washing Systems have a product range and expertise that will continue to develop innovative solutions that complement the efforts in producing high quality materials from difficult waste streams in a cost-effective manner.
RP: Have you noticed changes over the past year in the way aggregates producers evaluate equipment and consider it for purchase? Are buying decisions made more on the corporate side or more on the production side? Is used equipment getting a closer look right now? Are you evaluating your online presence to enhance sales?
Hegarty: One of the benefits of Terex Materials Processing is our extensive global dealer network across the world. Most of our business goes through our distribution channels and we work in partnership with our dealers to deliver our products and services to market.
We have presented to many aggregates producers this year at a corporate level, while our local dealers continue to call on the production facilities. We find that the corporate side are focused on using their buying power where possible – wanting to narrow it down to two to three preferred suppliers and have guaranteed discounts and support. We have had meetings on purchasing of machines and also on their rentals. Some of their concerns are distance to local support and capabilities of the local dealer. Their production facilities are making the final decisions while being encouraged to engage with the recommended suppliers. It is essential for us as a company therefore to present at both corporate and local levels. Our partnership with dealers enables us to effectively do that.
We are definitely investing more in building our online presence to enhance sales. We recently launched new websites for our brands to improve user experience, SEO, and make them responsive to a variety of devices such as mobile or iPads. We also utilize the full suite of digital marketing tools, including, social media, email marketing, video, pay-per-click advertising, targeted advertising campaigns, and digital mail out campaigns. The combination of these is proving to be very effective.
RP: How do you expect the industry to perform in 2019? What factors point to an up versus down year? What will some of the construction-heavy markets around the country be in the coming year?
Hegarty: We are indicating continued growth in the fourth quarter and into 2019.
RP: Please comment on anything that is impacting your business right now that you would like to bring up.
Hegarty: Our products are a big investment for our customers and part of our mission is to offer lifecycle solutions to provide optimum return on investment. Recognizing that the sale doesn’t end with the delivery of the product, we pride ourselves in working with our customers to achieve maximum ROI.
Machine uptime is critical to customer return on investment, and Terex has invested heavily in telematics – technology that pulls data from their machines in the field that helps our customers make informed decisions about their fleet. In addition to regular reports on machine and fuel consumption, output production tonnages, GPS machine tracking, operating hours – all to help customers manage their fleet (particularly useful for contractors and plant rental companies), our telematics is tied into predictive maintenance, where customers can know when their machine is due a service or when parts may need replaced. With telematics, we work with our customers to maximize uptime and longevity of their machines and can make sure that we can have the right parts, at the right place, at the right time.
Tied into this is the investments we’ve made on the efficient and effective supply of spare parts. We have a bespoke parts facility that represents an investment of $7.2 million by Terex, and the five-acre site – with the warehouse occupying 60,000 sq. ft. and the main office block 10,300 sq. ft. – plays a key role in driving the reliable, efficient supply of parts to Terex MP customers.
New Products on the Market
Powerscreen has four new offerings including the Powerscreen Trakpactor 550SR impactor. This machine is highly productive and was designed with excellent material flow and serviceability in mind.
Terex Finlay, in tandem with its 60th anniversary, launched six new products this year, including the new 883+ triple-shaft heavy duty screener, offering the customer a highly productive machine with a new screenbox that generates an aggressive and precise screening action.
EvoQuip, a comprehensive range to address the needs of the compact crushing and screening markets, has two new products, including the Cobra 290 impact crusher.
Terex Washing Systems launched the Aggwash 300, a product to meet the needs of the growing recycled aggregate market. This machine brings together rinsing, screening, scrubbing and sand-washing capabilities on a single plant.
Terex MPS recently launched the CRH1111R plant – a result of distributor and customer surveys that requested improved transportability, larger screen capacity and low maintenance electric components.