16/11/2004 - 21:00

Emeco examines options amid continuing growth

16/11/2004 - 21:00

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Perth-based heavy equipment supplier and possible sales target Emeco International has reported its fifth successive year of 30 per cent-plus growth in net profit.

Emeco examines options amid continuing growth

Perth-based heavy equipment supplier and possible sales target Emeco International has reported its fifth successive year of 30 per cent-plus growth in net profit.

Emeco achieved a net profit of $23.2 million in the year to June 2004, highlighting its status as one of Western Australia’s major privately owned companies.

The improved profit comes amidst reports that Emeco’s major shareholder, US company Darr Equipment, which owns about 80 per cent, is considering the sale of its stake.

Managing director Laurie Freedman, who has retained Deutsche Bank as an adviser, said he was aiming to make a recommendation to the board next month.

He said all options, from private equity to a public float, were being assessed.

Mr Freedman said Emeco’s trading results in the current financial year were buoyed by the strong growth in the mining sector.

“Our internal market research indicates a continuing very robust outlook for mining globally, and that underlines the need for more capital to support the growth of the business,” he said. 

A notable development last year was the payment of Emeco’s inaugural dividend, totalling $4.56 million.

Mr Freedman said the company had also paid a final dividend (but did not disclose the amount) to help reward staff who hold a minority shareholding.

Emeco was established in 1972 by Perth business executive John Court and has been under majority US ownership since 1996.

Mr Freedman, who took the reins just over five years ago, has overseen a period of rapid growth, with staff numbers now above 200.

This growth was typified by last year’s strong 39 per cent jump in revenue to $249 million.

Revenue from the sale of heavy earthmoving equipment and parts increased 55 per cent to $133 million, while rental income also rose strongly to $106 million.

The directors’ report said sales were especially strong in Queensland and Victoria.

The rental division benefited from the strength of the coal industry, particularly in Queensland, while the Indonesian operations were successful in securing “some substantial long-term rental contracts”.

The growth in the business required a 25 per cent lift in investment in plant and equipment to $160 million.

The level of inventory also rose, up 12 per cent to $65 million, “reflecting the expanded marketing activity in our sales and parts business”.

This spending was funded from operating cash flow and increased debt, which totalled $102 million at June 30.

Since then, the company has arranged a $170 million banking package with Westpac and National Australia Bank, giving it scope for further expansion.

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