West Perth-based Emeco Holdings has lowered its full-year profit guidance after it announced today it will exit its European operations and consolidate its North American business following a strategic review.
West Perth-based Emeco Holdings has lowered its full-year profit guidance after it announced today it will exit its European operations and consolidate its North American business following a strategic review.
The heavy equipment sales and rental company said that after previously announcing it would downsize its European operation, it will now exit the market completely, after it determined the market was unlikely to meet the required rate of return.
Emeco said the closure of the business is expected to be completed before the end of this financial year, and will cost the company up to $9.5 million.
Meantime, Emeco will incur a restructure charge of $20 million following a decision to close its US headquarters in Houston, Texas, and its facility in London, Kentucky.
"The fundamentals of the Appalachian coal market do not support an ongoing presence by Emeco in this region," managing director Keith Gordon said.
"The long term outlook is for a steady decline in coal production in the region and customer support for the rental model is unlikely to be sustainable in the medium term.
"Rental and sales fleet located in Kentucky will either be sold or relocated to Canada if it can be employed productively in that business."
Current Emeco president of Canada, Ian Testrow, has been appointed president of North America.
For the half year to the end of December 31 2009, Emeco said it expects an impairment charge of between $14 million and $15 million, while net profit after tax is expected to be $13.5 million, in line with previous guidance.
Net profit after tax for the 2010 financial year is expected to be lower than the previous guidance of between $46 million and $53 million.
"Our full year NPAT guidance of $40 - $44 million prior to restructuring and impairment charges reflects a slower than expected ramp up of activity, particularly in the Australian market in recent months where a number of mining projects have incurred delays of several months," Mr Gordon said.
"Nevertheless, the early benefits of the investment in three fleets of large mining trucks in 2009 are starting to flow through and we have seen steady improvement in fleet utilisation over the past few months.
"We have dealt with our underperforming businesses and now our remaining businesses in Australia, Indonesia and North America provide Emeco with a strong platform for growth as the market recovers.
"Management's attention will now turn to running our businesses well and completing our strategic planning which will be focused on delivering satisfactory returns to shareholders over the long term.
Shares in Emeco climbed five cents to 72c at 13:57 AEDT.
