20/02/2014 - 09:59

Emeco profit slumps on writedowns

20/02/2014 - 09:59

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Mining equipment supplier Emeco Holdings has posted a $180 million half-year loss, writing off $158 million in goodwill amid softness in the mining sector.

Emeco Holdings managing director Ken Lewsey.

Mining equipment supplier Emeco Holdings has posted a $180 million half-year loss, writing off $158 million in goodwill amid softness in the mining sector.

Emeco reported earnings before interest, tax, deprecation and amortisation of $33.1 million in the six months to December 2013, down 70 per cent on the previous corresponding period.

The company's revenue was down 49 per cent at $126.4 million, with global fleet utilisation flat throughout the period at an average of 45 per cent compared with 67 per cent at the same time last year.

Fleet utilisation in Australia reached a low point of 36 per cent in November 2013, with earth-moving activity particularly soft.

Emeco's results were driven lower by $158 million in impairment charges related to remaining goodwill from Emeco's acquisition by GS Private Equity and Pacific Equity Partners in 2005.

The company said it had taken a conservative approach in determining the carrying value of the group's goodwill.

Emeco has revised its full-year earnings guidance to between $82 million and $94 million, down from its original forecast of between $90 million and $105 million.

Despite this, Emeco managing director Ken Lewsey said the company had experienced improved fleet utilisation in recent months and expected to continue winning work in a competitive market.

"It was no doubt a difficult half for Emeco with our earnings and margins lower, but I am pleased that we made good progress on our strategy of focusing on those things we can control," he said.

"This included prudent measures such as restricting capital expenditure to maintaining existing assets and using our solid cash flow from operations and asset sales to reduce our net debt position.

"Pleasingly, our tendering activity last year is now converting to a number of new contracts being recently secured, which is translating into higher utilisation and is already generating improved earnings in the second half."

The company said it had reduced operating annualised cash costs from $280 million to $180 million in the six months to December 2013, while reducing net debt from $416 million to $351 million.

Emeco shares were trading 5.5 per cent lower at 25.5 cents at 9:56am WST.

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