Emeco books 12.4% profit decline

Earthmoving and mining equipment supplier, Emeco Holdings Ltd, has reported a net profit after tax of $30.5 million for the six months to December 2007, down 12.4 per cent on the corresponding period last year.

The profit is almost 24 per cent down on the $39.9 million achieved in the six months to June 2007.

Emeco's Australian business unit delivered a 4.1 per cent per cent increase in EBITA, but challenges in Emeco's international businesses led to the overall interim result of $55.4 million being almost 17 per cent lower than the $67.2 million delivered in the six months to June 2007.

Emeco managing director Laurie Freedman said it was pleased with the continued strength of its domestic
rentals, sales and parts businesses but was disappointed that this has been offset by start up costs and difficult trading conditions in its international businesses.

"I am pleased to report that by the end of the reporting period we were seeing a significant improvement in utilisation across our international businesses," he said.

Rental revenues increased by 5.4 per cent to $171.9 million. Equipment sales revenues increased by 44.0 per cent to $98.4 million.

The acquisition of Euro Machinery in January 2007 accounted for 75 per cent of this increase.

While a higher sales contribution and lower rental utilisation reduced EBITDA margins from 39.7 per cent to 34.2 per cent, EBITA margins declined more sharply from 24.4 per cent to 19.2 per cent reflecting the impact of significant minimum depreciation charges over under utilised equipment.

The pricing environment remains robust in all geographies.

Borrowing costs increased to $11.5 million for the half reflecting incremental debt drawings to fund further investments in rental fleet and working capital.

The group's effective tax rate reduced from 34 per cent to 29 per cent reflecting tax effected losses in the US.

Management expect the effective tax rate to remain at circa 30 per cent (as reported at Emeco's June 2007
full year result) for FY2008 and going forward.

Despite the challenges throughout the half, Mr Freedman said the company expected a full year FY2008 net profit after tax in the range of $65 million to $72 million, which is lower than its $74.7 million profit in FY2007 and reflects its current assessment of the effects of flooding in the Bowen Basin in northern Queensland.

Emeco shares lost 1 cent, or 1.9 per cent, to close at 77 cents each.