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Terex (TEX -3.42%)
Q1 2019 Earnings Call
May. 01, 2019, 8:30 a.m. ET


  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Good morning. My name is Marcella, and I will be your conference operator today. At this time, I'd like to welcome everyone to the Terex Corporation TEX Q1 2019 earnings call. [Operator instructions] Thank you.

Brian Henry, you may begin your conference.

Brian Henry -- Senior Vice President of Investor Relations

Good morning, everyone, and thank you for participating in today's first-quarter 2019 financial results conference call. Participating on today's call are John Garrison, chairman and chief executive officer; and John Sheehan, senior vice president and chief financial officer. Following the prepared remarks, we will conduct a question-and-answer session. We have released our first-quarter 2019 results, a copy of which is available on terex.com.

Today's call is being webcast and is accompanied by a slide presentation, which includes a reconciliation of GAAP to non-GAAP financial measures that we will use during this call and is available on our website. All adjusted per share amounts in the presentation are on a fully diluted basis. We will post a replay of this call on the Terex website under Events and Presentations in the Investor Relations section. Let me direct your attention to Slide 2 which is our forward-looking statement and description of non-GAAP financial measures.

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We encourage you to read this as well as other items in our disclosures because the information we will be discussing today does include forward-looking material. With that, please turn to Slide 3, and I'll turn it over to John Garrison.

John Garrison -- President and Chief Executive Officer

Good morning, and thank you for joining us and for your interest in Terex. First, I want to thank our global team for their continued focus on our customers which enabled our overall strong start to the year. Our Q1 performance represents a significant improvement compared to last year. The dramatic increase in operating profit and earnings per share versus the results we presented in Q1 2018 clearly demonstrates the value of implementing our strategy.

Building on an excellent 2018, MP increased sales and expanded operating margin again in the first quarter. MP's global markets remained strong and backlog continued to grow, up 17% on an FX neutral basis. AWP markets got up to a slower start than last year but gained momentum throughout the quarter. AWP is well positioned, heading into the main selling season with backlog of $1.1 billion.

The global markets for AWP, MP and towers and rough terrain cranes are generally stable at healthy levels, consistent with 2018. Turning to Slide 4. The Terex strategy continues to be: focus the portfolio on great businesses; simplify the organization; and improve the capabilities needed to win in the marketplace. The transition to a more focused two-segment structure, combined with the significant progress we made improving processes, tools and leadership talent in our priority areas enabled us to refine our corporate operating model.

Each functional area is moving forward with plans that will build upon the progress already made and deliver essential services in the most efficient manner. We are transitioning to a simpler operating structure that will reduce corporate operating expenses. Implementation has started in some areas and will continue throughout 2019. Turning to Slide 5.

We continue to make progress implementing our strategy. The sale of the Demag Mobile Cranes business is progressing on schedule. Subject to customary regulatory approvals, we continue to expect this transaction to close by midyear. We completed the wind down of our Mobile Crane production in Oklahoma City and sold the boom truck, truck crane and crossover product lines.

We are working closely with Tadano and Custom Truck One Source to ensure a smooth transition for our customers. We remain committed to the rough terrain and tower crane product lines in North America and around the world. We are investing in our parts and service organization to support our customers into the future. The resegmentation announced in February is complete and reflected in our financial results and operating structure.

Terex utilities is now in the AWP segment and the Pick & Carry cranes business has transitioned to MP. Our global rough terrain and tower crane businesses are included in Corporate. We continue to execute our disciplined capital allocation strategy by investing in innovative products and services and global manufacturing capability. MP announced a new U.K.

manufacturing facility where it will manufacture the Terex Ecotec waste management and recycling product lines and Terex mobile conveying systems. This is part of MP's strategy to add capacity to meet growing demand and simplify its operations. These are new adjacent businesses that MP has created that leverage its engineering and distribution capabilities. The new utilities manufacturing facility in South Dakota remains on schedule despite some severe weather conditions in the quarter.

Our Commercial Excellence teams are focused on improving the customer experience and driving process discipline. Another area where are focused on is improving process and tools for the dealer channel as dealers represent an important part of our overall distribution strategy. Finally, on Strategic Sourcing. Teams in each of our manufacturing facilities are making progress implementing their Wave 1 savings.

Wave 2 savings are being identified, and detailed plans, including the ability to fast-track certain categories, are being developed. We continue to expect savings of approximately $35 million this year. Turning to Slide 6. While we are maintaining the full-year 2019 guidance that we provided in February, as a result of our strong start, we now expect to be in the upper half of the $3.60 to $4.20 EPS range.

With that, let me turn it over to John.

John Sheehan -- Chief Financial Officer

Thanks, John. Let me begin by reviewing our Q1 segment highlights. AWP sales totaled $728 million in the quarter. Volume in North America was impacted by customers postponing some delivery until the second quarter and the week-long weather-related closures at our Washington State production and distribution facilities in February.

EMEA revenue was down modestly on currency and delivery timing, while AWP sales grew in Asia Pacific. AWP's operating margin in the quarter was impacted by the strength of the U.S. dollar particularly against the euro, which represented a significant headwind in Q1. Lower factory productivity due to a decrease in overall production volume, including the plant closures, also impacted margins.

Backlog was stable at $1.1 billion, positioning the segment well entering the strong selling season. Materials Processing is a consistently strong performer evidenced by another excellent quarter. Sales were $346 million, up 10% or up 15% on an FX neutral basis driven by continued strong global demand for crushing and screening products, material handlers and Pick & Carry Cranes. The MP team increased year-over-year operating profit by 33% and expanded its operating margin by 250 basis points on an adjusted basis.

These results were driven by improved operating performance across the portfolio and effective price cost management. Backlog continued to grow, up 11%, to $499 million, up 17% on an FX neutral basis. MP is well positioned across its portfolio of businesses to deliver excellent results again in 2019. The rough terrain and tower cranes businesses that are now reported in corporate performed in line with expectations in Q1.

For reference, we added quarterly 2018 continuing operations financial information that reflects the new segmentation to the Investor Relations section of terex.com. Let's turn to Slide 8 to review our consolidated results. Total sales of $1.1 billion were up 2% or 6% on an FX neutral basis. MP's strong performance more than offset AWP's slow start to the year leading to a 40 basis point increase in as-adjusted operating margin.

Investment in our Execute to Win initiatives and restructuring-related charges were the primary differences between our as reported and as adjusted operating profit. Net interest expense increased $9 million year over year resulting from increased borrowing and higher interest rates on floating-rate facilities. On an as-adjusted basis, we generated earnings per share of $0.87, $0.02 higher than the prior year on a comparable basis. However, this EPS result is 58% better than the $0.55 as adjusted EPS we presented in Q1 2018, clearly demonstrating the impact of our strategy execution.

Looking forward, we anticipate the distribution of the remainder of our 2019 earnings per share to be approximately 40% in Q2, 35% in Q3 and 25% in Q4. Turning to Slide 9. We continue to deliver on our commitment to follow a disciplined capital allocation strategy. As expected, we consumed more cash in the first quarter than the prior-year period.

Higher inventory was a significant contributor. Several factors are driving inventory levels, including timing of customer deliveries, demand growth in certain MP businesses, engine free buys, and Brexit-related risk mitigation actions. We expect inventory levels to decline over the next several months and normalize in the second half of the year. We continue to invest in our Execute to Win priority areas, although the level of investment will taper off over the course of 2019 as our internal capabilities mature.

Finally, we increased our quarterly dividend by 10% to $0.11 per share. The Terex team has and will continue to generate shareholder value through the execution of our disciplined capital allocation strategy. And with that, I'll turn it back to John.

John Garrison

Thank you, John. Before reviewing our segments, I'll spend a few minutes discussing the recent BAUMA show in Munich, Germany. BAUMA is the world's largest trade show for the construction and mining equipment industry with over 600,000 visitors from around the world. Terex had an outstanding presence and success at BAUMA.

We showcased our product and service innovation including our extensive line of industry-leading hybrid and electric power equipment and our suite of telematics solutions. Over 40% of the equipment we displayed with launch since the last BAUMA. We featured our Genie line of hybrid booms and scissors under the banner of Genie blue is your new green. As environmental regulations continue to shape demand around the world, Genie is leading the way with equipment that enables operators to work safely and efficiently while being respectful of the environment.

MP showcased its OMNI by Terex tablet-based control system. Using IoT technology, the OMNI system will revolutionize the crushing and screening job site by enabling a single operator to control the entire equipment chain. This will improve safety and productivity and further differentiate our MP product lines. Our tower crane business showcased it T-Link and T-Lift innovations.

T-Link is an advanced system that allows multiple cranes to work in tandem. T-Lift is a built-in elevator system that safely lifts the operator to their cabin. Both of these innovations improve operator safety and productivity, driving higher customer return on investment. In addition to showcasing our new products and services, BAUMA provided the opportunity to speak with a diverse cross-section of customers.

They expressed a consistent level of positive sentiment. There is pent-up demand for infrastructure investment across the developed markets and tremendous potential in the developing economies, from construction growth and adoption of Aerial Work Platforms and Materials Processing solutions. Terex is well positioned to grow on both fronts. BAUMA was a great show.

I was proud of our BAUMA team, from the core trade show team that executed the event, for the sales and support team members that worked the show. Terex' passion and commitment was clear. Turning to Slide 11, I'll review AWP. The global markets for Aerial Work Platforms remain generally stable at healthy levels, and the North American utility market remained strong.

The North American rental market was impacted by severe weather in several major markets in the first quarter leading to delayed equipment deliveries. Our customers are maintaining their positive outlook for the balance of the year, and we started to see order and delivery rates increase in March. Overall demand in Europe is stable, with pockets of growth, including strong demand for electric booms and scissors. AWP continues to make inroads in the Asia Pacific region fueled by increasing product adoption.

To support our growth in Asia, we are expanding our Terex financial services capabilities in the region. While bookings in the quarter were lower than the exceptionally high level in Q1 2018, with $1.1 billion of backlog AWP is well positioned heading in for the strong selling season. A key to improving margins in 2019 is the execution of our strategic sourcing plan, including transitioning significant volume to new suppliers. The implementation process is gaining momentum as the teams complete the inspection and testing required to transition parts to new suppliers.

This initiative is important for AWP as most of the $35 million savings objectives for 2019 is in this segment. In January, Genie opened another chapter in its history of innovation with the launch of its Lift Connect telematics solution. Life Connect will convert data into actionable information. This customized solution delivers benefits to small fleet operators and large national rental companies by providing tailored information to increase operator safety, improve uptime and reduce maintenance cost.

In short, Lift Connect is designed to increase customer ROI on Genie equipment. For the first time, we showcased a complete line of our new extra capacity booms from 40 feet to 135 feet. It is imperative to our customers that Genie is leading the industry with XC innovations. Turning to Terex Utilities.

The team continues to execute well in a stable market environment. Now that Utilities is a part of the AWP segment, we are accelerating cross-selling benefits. We are leveraging our network of utility service centers across the country to service AWP customers. This will improve customer service while increasing parts and service revenue.

The new state-of-the-art production facility remains on track. The site will manufacture and install Aerial Devices, Digger Derricks, and Auger drills. By consolidating from 10 facilities to one, Terex Utilities will significantly improve productivity, reduce lead times and increase capacity. Both our aerials and utilities businesses are well positioned heading into the second quarter.

Turning to MP. Materials Processing is a high-performing segment that consistently delivers strong results and meets its commitments. Global demand for crushing and screening equipment remained strong. Construction activity, aggregate consumption and environmental regulatory change are the main drivers.

The global market for material handlers also remain strong fueled by robust demand for scrap steel. And our Pick & Carry crane business continues to execute very well in a strong Australian market. The MP team continues to make progress in the emerging markets for environmental and mobile crushing and screening equipment. In EMEA, for example, new highway construction reached an all-time high last year and is expected to continue to grow.

Indian contractors are just beginning to fully appreciate the flexibility and productivity that mobile crushing and screening equipment provide. Better trucking materials over long distances, mobile equipment can process material close to the construction site, providing a significant benefit for the contractor and significant growth opportunity for MP. We have a strong foundation in India including an excellent team at our Hosur manufacturing facility just outside Bangalore. To support the growth prospects in India and the surrounding markets, we are expanding our manufacturing capacity in Hosur.

The expansion is under way and will be completed over the course of 2019. MP operates several facilities in the U.K. Our guidance assumes there are no major disruptions associated with Brexit. We continue to monitor events as the Brexit process unfolds, and will continue to take precautionary measures to mitigate potential supply chain disruptions.

I expect our global MP team to continue to execute at a high level and deliver on its plan again this year. Turning to Slide 13. To wrap up our prepared remarks, MP started the year strong and AWP picked up steam during the first quarter. We are executing our strategic plan: to focus the portfolio on high-performing businesses, simplify the organization and build capabilities in our Execute to Win priority areas.

We expect to significantly improve our financial performance again in 2019. As a result, we expect to be in the upper half of our full-year EPS guidance range. We are confident in achieving our 2020 objectives of 10% operating margin and greater than 20% ROIC. Finally, we will continue to follow our disciplined capital allocation strategy and create additional value for our shareholders.

With that, let me turn it back to Brian.

Brian Henry

Thanks, John. [Operator instructions] With that, I'd like to open it up for questions. Operator?

Questions & Answers:


[Operator instructions] Our first question comes from the line of Ann Duignan. Your line is open.

Ann Duignan -- J.P. Morgan Chase -- Analyst

Hi. Good morning. Maybe you could address the free cash flow of negative $257 versus your guidance for $165 million for the full year? And it's confusing not to have a slide in the presentation. But what happened? Are we still looking for free cash flow of $165 million for full year or should we change that?

John Garrison

Thank you for your question, and yes, we are looking for free cash flow for $165 million. I'll have John go through that in greater detail. But just a commentary to start that. I would just say that improving net working capital and increasing free cash flow is one of the highest priorities of our leadership team.

We take a step back and look to implement as our Focus, Simplify and Execute to Win strategies. We have made great progress on our operating -- 10% operating margin target, our 20% ROIC target, we've deployed capital back to shareholders of greater than $1 billion. The one area that we have not made the level of improvement that we need to make and that's why it will continue to be a focus for us to drive improvement is our free cash flow conversion to net income. So we fully acknowledge we're not happy with our Q1 results on free cash flow, but I'll have John kind of walk through where we are and then reaffirm the $165 million free cash flow target for the year.


John Sheehan

Yes. Thanks, John. So Ann, when you look at the free cash flow -- the negative free cash flow in Q1, it was larger than Q1 of '18. And that was principally the result of building higher inventories in the second half of last year.

Especially in the fourth quarter, in a tight labor market in the second half of last year, we were level loading production, especially in our AWP facilities in North America, and we did see lower revenue than expected. So as the inventory levels grew, we did pay suppliers for a large portion of the material that we manufactured in the fourth quarter in the first quarter in accordance with our payment terms with our suppliers. As we indicated in our prepared remarks, we do expect that will sell down these inventories during the upcoming spring and summer selling season, and we are not replenishing the stock levels to the same degree. When you look broader at working capital, we have also made very good progress as part of our strategic sourcing initiative.

With respect to our payment terms with suppliers for accounts payable, our accounts receivable collection efficiency is much better than it was. So but we acknowledge we have work to do on the inventory side. We are getting after the inventory levels. And I want to be very clear with you, we are absolutely committed to and are reaffirming the 2019 free cash flow guidance of $165 million.

Ann Duignan

OK. Thank you. I appreciate that. Maybe you could talk a little bit about the cadence of the free cash flow then going forward, when should we anticipate those inventories turning into cash, is it Q2 or at the back half of the year?

John Sheehan

We will be -- so the inventories will be sold down during the second quarter and into the early third quarter as part of the spring/summer selling season. And that we will be -- we expect to be -- I guess I should be a little bit less dogmatic. We expect to be free cash flow positive in all three quarters of the remainder of the year.

Ann Duignan

OK. I'll get back in line in the interest of time. Thank you.


Your next question comes from the line of Steve Volkmann. Your line is open.

Steve Volkmann -- Jefferies -- Analyst

Hi. Good morning, guys. Maybe just a quick follow-up there. The inventory build, was it more weighted to AWP than MP?

John Sheehan

Yes. It -- as I indicated, the primary inventory build, it was also in MP, MP inventories are also up, but the majority of it is in the AWP's facilities and in AWP North America.

Steve Volkmann

OK. Thanks. And then, obviously, to reduce that, you're going have some lower production levels, I guess going forward since you produce less than retail demand. I assume you have that under absorption into your forecast?

John Sheehan

We have, Steve. You are correct. We have reduced the production levels for our Aerial Work Platforms segment, especially here in North America in early 2019. And the guidance, including the expectation for being in the upper half of our guidance range that we indicated today, is factored into that thinking.

Steve Volkmann

OK, great. And then just a final one on that topic. As you shift I think one of the Johns mentioned a significant transition to new suppliers in AWP as part of your strategic sourcing. Does that require some kind of bridge inventory build, a? And b, is that a risk if you're moving a lot of suppliers that if there is a hiccup here that interrupts some production?

John Garrison

Thanks, Steve. As we indicated, the team is implementing our Wave 1. It is a sizable number of parts that are changing. Not necessarily new suppliers, actually it's consolidation of suppliers.

There is a bridge inventory that you have to put in place to ensure that you don't create disruption on the line, so that is a portion of the increasing inventory. But the teams have been planning for that as we move through the implementation of Wave 1.

Steve Volkmann

OK. Thank you.


Your next question comes from the line of Jamie Cook. Your line is open.

Jamie Cook -- Credit Suisse -- Analyst

Hi. Good morning. Just wanted to get comfortable -- you didn't necessarily give segment margin guidance like we did in the prior guidance. So can you talk about your comfort level with the Aerial Work Platform margin guidance that you gave in the last quarter given where we started off in the first quarter? And how much of the -- if you can help us understand how much weather impacted the first quarter within aerials? So I guess it's my first question.

And then my second question is just obviously the quarter came in much stronger relative to the street than what you would implied with the guide, you're saying -- I mean aerial was weaker, the corporate and other you said was in line. Materials Processing didn't beat by that much. So I'm just trying to understand what surprised you in the first quarter relative to what you initially anticipated? Thank you.

John Garrison

OK. A lot there, Jamie. So let me start with -- on the AWP side. Let me start with the market -- kind of a market commentary, and then I'll have John speak to the margin activity.

So as we said in the opening comments, the global market are stable at healthy levels. And there's overall positive customer sentiment. And as we enter into the primary selling seasons of Q2 and into the summer with the $1.1 billion backlog, we feel pretty good about where we stand in AWP. The North American rental channel is -- customers are seeing their end markets remain strained.

We're seeing good utilization and good rental rate improvements on a year-over-year basis. So that market seems, as we say, stable at healthy levels. In Europe, we're seeing that relatively flat overall in terms of our backlog. But as I indicated in my comments, we had a lot of positive sentiment with customers at the BAUMA show.

And then you'll see in the results a substantial increase in our sales in Asia-Pacific region, and a lot of that is from our AWP business. Our growth in China and other Asian markets has been great, and our year-over-year growth in China is north of 40%. Granted it's off a relatively small base, but nonetheless, we're seeing continued growth there. And so we think that market and the other Asian markets based on the strength of Construction and increasing product adoption are going to continue to provide a strong underlying background for demand.

And so that market commentary on how we're seeing globally AWP. And John, could you comment on the Q1 margins and margin outlook?

John Sheehan

Sure. So as -- when I think about the Q1 margins in AWP, I think there's really 4 factors that should be addressed: the first is FX, and that really was the largest headwind year over year that the segment was facing. The euro is considerably lower today than it was in Q1 of 2018. Q1 of '18, the average euro dollar exchange rate was $1.22 to the euro and in Q1 of '19, $1.13 to the euro.

We do ship a significant portion of our product for the European market from the United States and from China and, as a result, the decline in the euro was a significant headwind. In fact, if you take both the transactional FX effect as well as the translational impact FX impact, that was an impact in excess of $10 million year over year on the segment. So we do expect that, that headwind will normalize over the course of the year as the euro did decline over the first half of 2018. Second factor was the factory productivity.

We did have lower absorption rates from the lower volumes that we have in our North American facilities here in the first half of 2019 as well as the factory closures that we had, especially in the State of Washington in February from the north -- from the winter storms in the northwest. Third factor, price cost for the segment was actually a slight positive, with favorable price increases in the first quarter of this year, that were largely offsetting the cost increases that we experienced in the second half of 2018. Fourth factor, Strategic Sourcing. As we have talked about, our Strategic Sourcing initiative will drive $35 million of savings for the company year over year, with the majority -- significant majority of those savings coming from the AWP segment.

Those benefits are going to ramp up over the course of the year so that they were a smaller portion of the benefit in the fourth quarter -- I'm sorry, in the first quarter of this year. When you think about AWPs guidance, first of all, the guidance that we provided for the segments continues to be operative. Our not providing changes in the guidance is not in any way stepping back away from that guidance but rather it's still early in the year. We're heading into the prime selling season, and so we kept the guidance to where it is and recognize that overall for the company would be at the upper half of guidance range.

The execution of our strategic sourcing initiative and those savings which are going to grow over the year will drive margin expansion for the AWP segment. So overall, we see AWP as well positioned going into the spring/summer selling season and to drive growth and margin improvement in their business.

Jamie Cook

OK. Thank you. I'll get back in queue.


Your next question comes from the line of David Raso. Your line is open.

David Raso -- Evercore ISI -- Analyst

Hi. Good morning. For the first quarter, on a pro forma basis, your company margins were up 9.3% versus the 8.9%. And just thinking through the way you gave the EPS guidance for the rest of the year, can you help us understand for the second quarter pro forma, do you expect your margins to be up year over year, flat? Just for some perspective, second quarter pro forma margin.

John Sheehan

Yes. So your -- on an apples-to-apples basis year over year in the second quarter for the company as a whole, we would anticipate our margins to be up for the continuing operation. Now that said, let me just -- as we demonstrated on Chart 3 of our presentation material, the significant benefit or impact that the focusing of our portfolio had on our first-quarter year-over-year results, and we really tried to bring that out in the presentation. You see that our margins increased significantly.

Our EPS increased from $0.55 last year to $0.87 this year or a 58% increase. So it's that the focusing of our portfolio on our high-performing businesses that are now out earning their cost of capital has been a significant contributor to driving shareholder value. And yes, our margins for the company will be up for continuing operation in Q2.

David Raso

Yes. That's what I'm just trying to understand sort of backing into a true full-year EPS guide, not just upper end of the range. Because if your margins are up year-over-year pro forma in the second quarter, with a reasonable revenue number just so you're on track to hit the full year, it does seem to be implying a second quarter that's $1.40 or $1.45, which would then, given the rest of your cadence, implies EPS even a little bit above the high end of your range that you gave. I'm just trying to make sure we level set here on the second quarter.

Margins up sequentially -- I mean, sorry, year over year and the revenue numbers have to be $1.3 billion or so or something that gets you on pace for the $4.7 billion. So maybe if you want to clarify exactly what you mean by the upper half of the EPS range just so we all level set for 2Q.

John Sheehan

Yes, David. Look, I appreciate your seeking to back me into -- or back us into stronger guidance. I think we should be clear. We had a very strong Q1.

We're very pleased with the results of our businesses. And we are well positioned with a very strong backlog going into the strong spring and summer selling season. And as a result, we indicated that we would be at the upper half of our guidance range. And as -- we expect 2019 to be a very strong year for Terex, but we also believe that we'll have much better visibility to provide a more definitive set of guidance once we get -- for the full year once we get past the second quarter.

I think I'll just leave it there.

David Raso

The last point, the proceeds from the sale during the course of the year, how quickly can we assume the use of those proceeds. I know that's not in the guide currently? But proceeds in the door, when will you expect those to be put to work?

John Sheehan

So the proceeds from the sale of the Demag business. We continue to expect the Demag sale to close midyear. We're on track very well with that transaction. And we would put those proceeds to work immediately because as we indicated in our Q4 earnings call, we would intend to pay down borrowings with the proceeds.


Your next question comes from the line of Joe O'Dea. Your line is open.

Joe O'Dea -- Vertical Research Partners -- Analyst

So similar to the walk you gave on AWP margins, if we think about the Material Processing margins that were very strong in the quarter, could you give a little bit of the bridge or the contributions there? I think FX is instead a tailwind for MP in the quarter. But just so we know kind of what the benefits were? And maybe some of the considerations moving into the rest of the year?

John Garrison

Sure, yes. Sure. Well, Joe, again, similar to AWP, I think I'll just provide some overarching market commentary and then have John talk specifically to the margins. But again, as we indicated in our prepared remarks, MP continues to have strong execution with their sales up 10%, backlog up 11% and margin -- significant margin improvement of 250 basis points.

And that's really coming from strength across the portfolio of businesses within MP. Our core crushing and screening business continues to grow, is relatively stable in North America, but we saw good growth in the global markets and strength in the Emerging Markets. The other business that continues to perform well and a good recovery is our Material Handling business, our Fuchs business. We saw a broad-based growth there, one of the benefits of high steel cost is that this segment's scrap steel has remained high and that stimulates replacement demand in that business.

We've also expanded our global distribution and expanded our product line, so we're seeing good growth in Material Handling. And then on environmental business, as I mentioned in my comments, we've got a new factory there in Northern Ireland for our Ecotec line. We're seeing good growth in the environmental business, especially as regulatory rules around the world change for the processing. And finally, our North American concrete business, we had good orders in Q4, so we went into the year with a much stronger backlog than the prior year.

And overall, we are making some investments in capacity in our MP business to take advantage of the growth opportunities. We're investing in Northern Ireland and we're investing in our Hosur facility as I mentioned as well in my opening comments. So overall, MP has been consistent. It's a good growth story.

And what we're pleased about is, it's a much more important part of our overall focus portfolio going forward. So that's kind of a macro in MP. John, you want to talk specifically on the margin side?

John Sheehan

Yes. Thanks. So Joe, what I would say with respect to MP margin is I would focus on really four factors in this business also: first is that revenue for MP was up in the first quarter year over year by 10%. And the one thing that the Materials Processing team does better than anything else is execute.

And when they have strong revenue, they drive that revenue through operating performance to the bottom line, and that was really the case in Q1. So I would just say operating leverage was by far the biggest benefit they received in the quarter. Two, second was mix of businesses. As you know, the MP business is a -- the MP segment is a collection of businesses, and we did see growth, especially in our Fuchs business line in the first quarter, and that drove outsized operating margin growth for the business.

No. 3, price cost is positive for the MP business year over year. They have benefited from higher price. And given their costs are largely outside -- their manufacturing is largely outside of the United States, they didn't -- they're not feeling the same cost pressure that, for example, our Aerial Work Platforms segment is feeling with steel prices here in the United States.

And then lastly, I will acknowledge that the year-over-year change in the British pound is a bit of a tailwind to them and did -- they did benefit to a certain extent from that. So overall, as we said in our prepared remarks, MP is really a consistent performer, and they have really become an increasingly important part of our focused portfolio.

Joe O'Dea

I appreciate the details. And then one just related to the strategic sourcing plan for the year and the guide. It doesn't sound like there was anything really within MP that drove kind of unusually high margins in the quarter, and then there is a set up for AWP margins to expand over the course of the year. And given the size of the beat in 1Q, you could presumably have actually raised the range.

And I guess the question is the degree to which there's -- you're keeping cushion in there just because of the uncertainty around strategic sourcing. And so I think the risk being if there are any hiccups there, what does that do to the full year? But how guarded do you feel against that just because of what could be cushion in the guide?

John Garrison

Thanks. And so if we look at the Strategic Sourcing, as we said, Wave 1, a lot of the commodities were more oriented toward the AWP business. Also the respective volumes of the AWP business have enabled us to attract suppliers to that marketplace. We do have savings in the relative MP businesses, but as a percentage of the overall saving it's actually much smaller.

Most of the savings this year into to commodities are in the AWP segment. So we will have some as we move through the year, but the biggest percentage of that -- of the savings is, in fact, in AWP as a result of the commodities and the respective volumes between the different businesses. So yes, there is some, but it's not the driving force in margin improvement throughout the year as it will be in AWP.

John Sheehan

I'll just say, just a comment on our guidance is that we did have a very strong Q1. We were very pleased with the results. The $3.60 to $4.20 guidance range is a -- and being in the upper half of it provides a -- potentially a very significant increase. But it's early in the year.

And while signs are positive for the year, I think that once we get past the spring/summer selling season here, we'll have much more -- much greater visibility to the full year.

Joe O'Dea

Thank you.


Your next question comes from the line of Andy Casey. Your line is open.

Andy Casey -- Wells Fargo -- Analyst

So I'm going to beat the dead horse. I want to follow up on some of the prior questions about EPS quarterly attribution. And I understand you've answered a lot of the questions that have been focused on this. But I just want to revisit the seasonal attribution for the first quarter and understand has that increased permanently to the low-20s that's implied by the performance and the outlook versus the original view for 15%? A lot of the questions are looking at the AWP comment, sounding like it's going to gain momentum through the year at least versus last year.

Is the variance really just related to something else which may include conservatism? Or are we looking at just structurally higher contribution from the first quarter going forward?

John Sheehan

I guess what I'd -- let me try to make some comments and see if we address your question. First of all, from a structural perspective, as a result of the focusing of our portfolio on our high-performing segments, AWP and MP, the disposition of the Mobile Cranes businesses, we definitely have structurally lifted the operating performance of the company. And you see that with the dramatic increase in the margin that the business actually reported in 2018 of below 6% to above 8% in 2019. When you think about our Q1 performance and I -- you look at -- I would say that a portion of our over performance against the year was in the Corporate & Other segment.

The Corporate & Other segment, with the resegmentation we did in the fourth quarter does have our towers and rough terrain -- European rough terrain businesses included in there. Those operating businesses performed in line with the expectations we had for them. Our corporate costs were lower in the first quarter. They are traditionally lower in the first quarter and ramp over the course of the year, but we did also see lower spending in our corporate cost structure in the first quarter of this year than we -- than our expectation.

Some of that may be timing. It is absolutely our intention to capture that underspending for the full year and drive it to the bottom line. So we're managing our cost structure, we're investing in the priority areas in our higher-margin businesses. And so I do think that we have -- I think you used the word permanently.

I do believe that the higher margins you saw in Q1 2019 for the company is a permanent improvement that you'll see on a going-forward basis.

Andy Casey

OK. Yes, the permanent was related to the attribution by quarter. Has that changed?

John Sheehan

You mean to future years or help me with -- to future years?

Andy Casey


John Sheehan

I think you can also think about that for future periods. Yes.

Andy Casey

OK. Thank you very much.


Your next question comes from the line of Seth Weber. Your line is open.

Seth Weber -- RBC Capital Markets -- Analyst

Hey, good morning. Just following up on Andy's question. Your prior guide had called for, I think a $75 million loss for Corporate & Other.

John Sheehan


Seth Weber

I just -- and I think it was like $5 million here in the first quarter. So are you suggesting that we should still think about that $75 million as the right number? Or I'm just -- we're all just trying to kind of put these numbers together basically.

John Sheehan

Yes. I think that as you saw our net operating cost in the Corporate & Other segment in Q1 was about $5 million that compares to about $9 million in Q1 of '18, so slightly lower. I acknowledge that if you take 75 divided by four that, that -- that obviously $5 million is much less than that. We would expect, as I said in response to Andy's question some -- we do expect that to drive a portion, maybe a significant portion of the underspending in Corporate & Other to the bottom line over the course of the year, and we'll also have greater visibility for that once we get past the second quarter.

So yes, I would think about driving some of that savings against the -- as being a permanent reduction in the $75 million number that we provided in our Q4 earnings.

Seth Weber

OK. That's very helpful. Thank you. And then my follow-up question is on -- John, I think in your prepared remarks, you talked about some AWP shipments, some customers pushed out from the first quarter.

I guess my question is, was that weather-related? And/or have those shipments occurred here in the second quarter?

John Garrison

Yes. So overall, we would attribute most of the pushout in the Q1 out into Q2 as weather-related. As John indicated that we always have weather in Q1, but the weather this Q1 was exceptional, especially as you looked at how it impacted our operations in Washington state, in the duration of time that the plant and the shipping facilities were down. That also impacted customers as well in multiple areas.

So I would attribute most of the pushout, if you will, to associated with weather, and would expect to see that pickup in Q2. And as I said, we did see stronger momentum as we progressed through the quarter and late into March with shipments. We actually became capacity constrained, as you can imagine, in the last week of March. So good momentum.

And I think the pushout you can attribute to most, if not all, to weather-related activity.

Seth Weber

That's super. Thank you very much, guys.


Your next question comes from the line of Joel Tiss.

Joel Tiss -- BMO Capital Markets -- Analyst

OK. So once -- everyone keeps asking the same questions, so I will try to go in a different direction. So once the simplification of the portfolio is done, how do we think -- or how do you guys think about capital reallocation? Is there going to be a little -- you're still going to focus on debt repurchase and share repurchase? Or should we think about it differently? Or it's too early?

John Garrison

Thanks, Joel. And so as part of our overall Strategy, Focus, Simplify and Execute to Win, I think it's demonstrating that it is a much stronger portfolio going forward. We've also, as part of that strategy, had a disciplined capital allocation strategy that really spoke to making the organic investments in innovation and engineering, capital investments as required, strengthening our balance sheet and then returning capital to shareholders. That disciplined capital allocation strategy has not changed.

Now we are in our ongoing strategy and strategy review process and we obviously review that with the board of directors. But as of today, there is no change toward disciplined capital allocation strategy as we move forward. But I think it is clear that portfolio of businesses that we have now are much stronger than the portfolio of businesses that we had. And we also believe that there's opportunity to grow these businesses, both Aerials and MP around the world as we look at Construction spend, but we also have to look at the adoption and the adoption curve.

We talk about adoption with Aerials, but there's also significant adoption potential in emerging markets in our MP as people move from mobile crushing and screening, as we move to processing more waste on the environmental stream. So overall, we think there is good growth opportunities -- organic growth opportunities in these businesses. And our capital allocation model as it is today has not been -- is not modified. That's obviously something we continue to look at.

But right now, it's the same capital allocation strategy that we have been executing for the last couple of years.

Joel Tiss

And can we spend a minute on the MP business? How many competitors are out there? Kind of any sense of what your market share is? I know it's a diverse grouping of different pieces, but is there any way to kind of size the opportunity?

John Garrison

So in terms of talking specific market participation, I will say this, we enjoy good market participation in our core crushing and screening businesses through our multiple brands. We enjoy a good market position in our material handling business. On the concrete part of the business, we're principally in two smaller segments. We enjoy very good market positions there in front discharge concrete, trucks and pavers.

And then environmental, opportunity to grow. That's a highly fragmented overall market. And then finally, our Pick & Carry business down in Australia enjoys a significant market participation rate, especially in the Australian market. So overall in these businesses, and I think that's been a key of our focus strategy is, these are businesses that enjoy strong market positions, strong brands, a good capability to drive innovation through their engineering and good distribution capability, and that's what enabled these businesses to grow and to perform.

So I don't want to talk specific market participation rates, but each of these businesses -- our core businesses enjoy strong market participation rates and our developing businesses, they're highly fragmented markets where we're seeing rapid growth based on our capabilities. So we're excited about the MP business. And the other thing about MP is the regional dispersion of the revenue. If you look at the revenue, it's 35% in the EU, 35% North America, 20% in Asia, six -- I'm sorry, 10% in the rest of the world.

So you've got good geographical dispersion in this business as well. So overall, this is a business worth investing in, we are investing in this business, and we think there is good opportunity in the future for our MP business.

Joel Tiss

Thank you.


There are no further questions at this time. I turn the call back over to the presenters.

John Garrison

Again, thank you for your interest and time in Terex. If you have any further questions, please do not hesitate to reach out to Brian so that we can address those questions. And again, thank you for your time and thank you for your support of Terex.


[Operator signoff]

Duration: 61 minutes

Call participants:

Brian Henry -- Senior Vice President of Investor Relations

John Garrison -- President and Chief Executive Officer

John Sheehan -- Chief Financial Officer

Ann Duignan -- J.P. Morgan Chase -- Analyst

Steve Volkmann -- Jefferies -- Analyst

Jamie Cook -- Credit Suisse -- Analyst

David Raso -- Evercore ISI -- Analyst

Joe O'Dea -- Vertical Research Partners -- Analyst

Andy Casey -- Wells Fargo -- Analyst

Seth Weber -- RBC Capital Markets -- Analyst

Joel Tiss -- BMO Capital Markets -- Analyst

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