Emeco books $7.85m impairment charge

Earthmoving equipment supplier Emeco Holdings will book a $7.85 million pre-tax impairment charge on its Indonesian business, lowering earnings expectations for the company's first half.

Emeco had previously told the ASX that its net profit after tax would be in the range of $27 to 29 million, but managing director Keith Gordon said the one-off impairment would result in NPAT of $23.6 million.

"The company had been expecting to announce a result slightly above the top end of the guidance range," Mr Gordon said.

Mr Gordon said the charge related to a debt owed to Emeco from an Indonesian mining contractor, which has faced operational and equipment issues over the past six months.

"Continuation of trading was predicated on a transparent mine plan which demonstrated that the debt incurred would be recoverable," he said.

"However, information received from the customer over the weekend has now cast serious doubts over the recoverability of the debt owing at 31 December and management feels it is now prudent to impair it.

"Management will asses its commercial and operational options with this customer over the next few days, which include the potential re-deployment or stand down of equipment."

Emeco will report its first half earnings on February 22.

The news prompted a mixed response from investors, as Emeco shares fell then gained after the announcement.

The stock initially fell two per cent, before being up three cents, or 2.7 per cent, at $1.15 at 09:30AM today.