Emeco exits Chile with asset swap deal

Heavy equipment supplier Emeco Holdings will leave its struggling operations in Chile behind through an asset swap agreement that will boost its Australian fleet by 85 units.

Perth-based Emeco told the market today the asset swap agreement, with an undisclosed party, would generate net cash proceeds of about $12 million and reduce its expected capital spending needs for FY18 by $5 million.

It will also end the company’s operations in Chile, with Emeco’s entire fleet to be located in Australia post-transaction.

In a statement, Emeco managing director Ian Testrow said the asset swap would materially enhance the company’s capacity in Australia, with the majority of the 85 machines it would acquire under the deal to service the Queensland coal market.

“The acquired assets are expected to generate similar earnings to those in Chile in FY18 with further upside in the medium term,” he said.

“The asset swap reinforces Emeco's strategy to build a world-class fleet capability to deliver customers with equipment solutions that are tailored to their needs and that can drive meaningful value over the long term.

“The asset swap allows management to focus on Emeco’s Australian operations and endeavour to be a leader in providing high-performance fleet.

“The net cash impact of the asset swap also assists us to accelerate our deleveraging and improve our balance sheet flexibility going forward.”

Emeco shares were 4.7 per cent higher to 11 cents each at 1:50pm.