Australian earthmoving rental giant Emeco Equipment said it will significantly downscale its presence in the United States, consolidating the remaining assets with its Canadian operations. The company’s chief executive Keith Gordon also said the company will exit Emeco’s European operations.
Following a review of the company’s operations undertaken in December, shortly after Gordon took over as chief executive, the company decided to consolidate U.S. and Canadian operations into a single North American business unit. Ian Testrow, previously president of Emeco Canada, was named president of Emeco North America, based in Edmonton, Alberta, Canada. The company’s Houston office, which was headquarters of its North American operations, will be closed. The company will also shut down its London, Ky., facility.
“The fundamentals of the Appalachian coal market do not support an ongoing presence by Emeco in this region,” Gordon said. “The long-term outlook is for a steady decline in coal production in the region and customer support for the rental model is unlikely to be sustainable in the medium term. Rental and sales fleet located in Kentucky will either be sold or relocated to Canada if it can be employed productively in that business.”
Restructuring charges of up to AU$20 million (about U.S. $17.9 million) will be incurred in the U.S. business in the second half of fiscal year 2010 and the restructure will be completed by June 30.
“Emeco remains committed to pursuing profitable growth in North America, which we see being achieved by complementing our presence in the Canadian oil sands with customer-led projects in other geographies,” Gordon said. “While we continue to see opportunity in the U.S., we will only pursue these markets where we are confident that a low-cost business model can be applied to deliver value.”
Emeco, expects to report operating net profit after tax for the first half of fiscal 2010 of about AU$13.5 million (about U.S. $12.1 million), which is in line with previous guidance.
“The operating environment in the first half has been challenging but we are seeing strong signs of recovery in our market,” Gordon said. “Although a number of new mining projects that will provide revenue for Emeco have incurred short-term delays, momentum has been building towards the end of the half.”
“We have dealt with our underperforming businesses and now our remaining businesses in Australia, Indonesia and North America provide Emeco with a strong platform for growth as the market recovers,” added Gordon. “Management’s attention will now turn to running our businesses well and completing our strategic planning, which will be focused on delivering satisfactory returns to shareholders over the long term.”
Emeco, based in Perth, Australia, now with North American headquarters in Edmonton, Alberta, is No. 42 on the RER 100.
