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Commentary: Nov/Dec 2009

A generally upbeat economic forecast from the Conference Board might
bring some welcome relief to those in the battered construction
equipment business.

A generally upbeat economic forecast from the Conference Board might bring some welcome relief to those in the battered construction equipment business.

In the Conference Board’s Provincial Outlook – Autumn 2009, British Columbia is expected to lead Canada’s provinces in 2010 with real gross domestic product (GDP) forecast to grow by 4.2 per cent from 2009. The forecasted growth rates for other provinces are: Saskatchewan at 3.7 per cent; Ontario at 3.2 per cent; Alberta at 3.0 per cent; Quebec at 2.4 per cent; Manitoba at 2.5 per cent; New Brunswick at 2.0 per cent; Nova Scotia at 1.9 per cent and Prince Edward Island at 1.8 per cent. The exception to the growth trend is Newfoundland and Labrador, where real GDP is forecasted to decline by 0.5 per cent in 2010. For many, economic recovery cannot come soon enough, with industry players big and small struggling against fierce market headwinds.

The Terex Corporation reported third-quarter 2009 sales in its construction equipment unit 56 per cent down from a year earlier and an operating loss of $US59 million. Terex has been seeking buyers for parts of the construction equipment unit but the level of interest from the equipment industry has been tepid at best. Absent any buyers, Terex’s first priority is to “fix it ourselves,” says chairman and chief executive Ron DeFeo.

Vancouver-based Finning, the world’s largest Caterpillar equipment dealer, reported a 66 per cent drop in third-quarter 2009 profits. President and chief executive Mike Waites described it as “a tough quarter,” adding that revenue declined at the company’s Canadian operations and that its United Kingdom group experienced difficult markets.

According to Volvo Construction Equipment (VCE), where third-quarter 2009 net sales declined by 38 per cent, the total world market for heavy, compact and road machinery equipment decreased by 42 per cent in the third quarter of 2009 compared to the same period last year and the North American market decreased by 50 per cent.“Tough market conditions continue in the sector, but there are some positive signs indicating that the decline in demand may have bottomed out and that we are now beginning a gradual recovery,” said Olof Persson, VCE president and CEO.
Tough indeed, but getting better.