Perth, Australia-based Emeco Holdings Ltd. last week reported an operating net profit after tax of AU$57.7 million (about U.S. $53 million) for the 12 months ended June 30, a 14.5-percent decrease compared with the previous 12-month period. Operating cash flow after capex for the year was AU$81.2 million (about U.S. $74.6 million).
Revenue for fiscal year 2009 was AU$528.2 (about U.S. $485.2 million), a 14.5-percent decline from the previous fiscal year total revenue of AU$617.9 million.
“The company’s strong start to the year with a record interim profit was overshadowed in the second half by unprecedented deterioration in activity across the global mining and construction industries,” said managing director Laurie Freedman. “Despite facing the toughest trading conditions in the company’s 33-year history, Emeco generated a second-half operating net profit of $18.7 million, maintaining strong cash flow of $40 million, and ensuring the balance sheet remained in very good shape during this volatile period.”
Freedman remained bullish on the company’s future. “Emeco’s business strategy is right, the signs of a turnaround are encouraging, and the business is very well positioned to see an improvement in earnings rate as we progress through FY10.”
Emeco’s U.S. business achieved first-half EBIT of $1.2 million with average utilization of 77 percent, however reduced activity in the Appalachian coal region, driven by lower coal prices adversely affected utilization during the second half, the company said. Overall operating EBIT for the U.S. in FY09 was $1.8 million, representing a significant turnaround from the $4.1 million EBIT loss in FY08.
The Canadian rental division grew strongly in the first half of 2009, with EBIT of $1.1 million as Emeco established its presence in this market. However, a substantial winding back of oil sands development, natural gas drilling and general construction activity resulted in a second-half operating EBIT loss of $1.6 million, resulting in a full-year EBIT of $9.5 million, a 38.7-percent year-over-year decrease. The company said cost-reduction strategies and the ongoing re-orientation of the fleet towards larger mining equipment where longer-term demand fundamentals remain intact will ensure a return to profitability in the first half of fiscal 2010.
The Australian rental division generated $84.3 million EBIT, a 10-percent decline from the previous year, while the more recently established Indonesian rental division generated $18.6 million in EBIT, an 89-percent increase, generating a number of large contracts during the fiscal year, with assets from other businesses transferred by Emeco into Indonesia.
“The bulk of our earnings growth is expected to come from Australia, Indonesia and Canada over the next two years, primarily through increased utilization and organic growth of our larger mining fleet to meet the expected growth in commodity volumes in coal, gold, iron ore and oil sands,” said the retiring Freedman (see following story http://rermag.com/trends_analysis/internationalnews/emeco-gordon-112009/index.html). “We also expect the recovery in global credit markets to be more protracted than the global economic recovery, which will benefit the Emeco rental model.”
Emeco is currently forecasting FY10 net profit after tax to be in the range of AU $46 million to AU$53 million, with guidance reflecting a measured recovery in activity in the first half with stronger earnings in the second half of FY10.
Regarding its North American business, Freedman said the company’s U.S. business is leveraged to the domestic consumption of thermal coal for power generation, and current demands for coal volumes is low. “We do not expect an improvement in activity until mid-2010, Freedman said. He added that the Canadian business was severely impacted by the downturn in oil sands activity during FY09. “However, with oil prices stabilizing and the global economic uncertainty abating, activity in this market is picking up and we expect it will be sustained over the coming years.”
Based in Perth, Australia, with U.S. headquarters in Houston, Emeco is No. 42 on the RER 100.
