Emeco Holdings Ltd., the Perth, Australia-based earthmoving rental specialist, plans to spend an additional AU$165 million (about U.S. $174 million) on capex during the next 12 months, the company said this week, in addition to the previously announced $110 million to $130 million. Emeco will spend about $72 million on equipment for its Canadian operations in Alberta, supporting the oil sands and coal mining markets.
The equipment spend is part of Emeco’s organic growth strategy, concentrating on equipment rental in mining markets in Canada, Australia and Indonesia.
Emeco also said it expects fiscal-year 2011 net profit after tax in the range of $55 million to $57 million.
“We continue to observe high levels of mining activity in Australia, Canada and Indonesia, which is translating into demand for Emeco’s rental offering,” said Emeco CEO Keith Gordon. “Despite some recent operational and weather issues, which have dampened our earnings in the second half, we expect to deliver a solid result for FY11 with strong momentum going into FY12. Given the healthy outlook for mining volumes, we are investing in large mining equipment to meet growing demand from our customers. This equipment, which comprises new and used machines, has been secured through our global procurement capability and will be put to work over the course of FY12.”
About $85 million of the investment relates to the delivery of new equipment ordered from OEMs, including $43 million of orders announced in February 2011. The balance of $80 million represents low hour used equipment, which was sourced in Europe and South Africa.
“Emeco’s global procurement team has been active in identifying markets where suitable equipment can be sourced,” added Gordon. “The ability of the team to identify opportunities and then move quickly to secure them where they meet our investment hurdle rates has been instrumental in sourcing the used equipment packages. In a tight equipment market, this capability is invaluable.”
The purchased equipment includes large mining truck and excavator fleets suitable for coal, iron ore, gold and oil sands production. In addition to the $72 million allocated to the Canadian market, $93 million will be spent on the Australian market.
The company also said group utilization is expected to average about 83 percent in the second half of fiscal 2011, compared with 88 percent in the first half. Canada’s performance improved to 80 percent utilization in the first half of FY 2011.
With North American headquarters in Edmonton, Alberta, Canada, Emeco North America is No. 85 on the RER 100.