Emeco lifts earnings

Shares in mining equipment supplier Emeco Holdings were up 50 per cent today after the company revealed an earnings uplift despite continued tough conditions.

Emeco said today it expected to report $54.2 million in earnings before interest, tax, depreciation and amortisation for FY16, up 25 per cent on its FY15 result and within its target range.

The company posted $12.7 million in underlying Ebitda for the fourth quarter of FY16 with revenue of $44.4 million, which was down 18.1 per cent on the previous quarter mostly due to a continued reduction in work at its Canadian operations.

“While Canada revenues have reduced, the HMER partnership has enabled a substantial reduction in costs in the business, such that Canada is now generating positive Ebitda,” the company said in a statement.

“The restructuring of the Canada business and other project fit initiatives improved the underlying operating Ebitda margins to 28.6 per cent, up from 24.2 per cent in Q3 2016.”

Emeco’s group utilisation averaged 77 per cent in the last quarter, however its operating utilisation averaged just 40 per cent.

“As such there remains significant upside capacity in our fleet,” it said.

“The uplift in Australia was offset by the transition of our Chile fleet from Encuentro to Esperanza.”

Managing director Ian Testrow said cost reductions and efficiency improvements over FY16 improved the company’s financial performance with the 25 per cent operating Ebitda growth result.

“This is a great achievement by the business in light of the difficult operating conditions over the past 12 months,” he said.

“Difficult operating conditions continued into the fourth quarter with fire devastating the Canada oilsands region.

“Proactive management by our Canadian team ensured no employees were harmed.”

Emeco generated net cash flow of $11.8 million in the last quarter, with its year-end cash balance reaching $24.8 million.

“This is a good result considering the weakening Canada business and poor conditions in the second hand equipment market impacting asset disposals,” Mr Testrow said.

“When combined with the $US52.3 million bond purchase in December, the business has reduced net debt by $49 million over FY16.”

Emeco shares were up 50 per cent, or 1.9 cents, to 5.7 cents each at midday.