Emeco revises down full-year guidance

27/05/2009 - 08:49

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Mining services company Emeco Holdings has again cut its net profit forecasts for the current financial year as a result of continuing volatility in global mining and construction industries.

Mining services company Emeco Holdings has again cut its net profit forecasts for the current financial year as a result of continuing volatility in global mining and construction industries.

A provider of earthmoving equipment, Emeco said it now expects net profit after tax in fiscal 2009 to be between $56 million to $60 million, down from the previously advised $65 million to $72 million.

The revised forecast is 8 per cent lower than average broker consensus estimates of $63 million, and 15 per cent lower than profit in the 2008 financial year, Emeco said.

Weaker than expected conditions in Queensland, Canada and Europe had "largely impacted earnings", Emeco said.

The recent appreciation in the Australian dollar also had contributed to reduced earnings, it said.

The company said activity in the thermal coal and gold markets of NSW and Indonesia, and the recovering oil price, was providing management with confidence in its outlook and a continuing recovery in utilisation into the first half of next financial year.

"However, the operating environment in some markets remains unclear due to the lack of visibility and is dependent on a broad based recovery in the global economy," it said.

An update on Emeco's internal review of its underperforming European business, and possible impairment and restructuring charges, is expected to be made available at the company's full year results presentation in August.

 

The announcement is below:

 

Emeco Holdings Limited (ASX: EHL) today announced that as a result of continuing volatility across the global mining & construction industries, and a slower than expected recovery in utilisation, NPAT for FY09 is expected to be in the range of $56 - $60 million, being approximately 15% lower than FY08 earnings. This is below previous guidance of $65 - $72 million and approximately 8% below average broker consensus estimates of $63 million.

Weaker than expected conditions in Queensland (coking coal), Canada (Oilsands) and Europe have largely impacted earnings, while the recent appreciation of the Australian dollar has partially contributed to reduced earnings expectations.

Despite lower than expected earnings, cash generation remains robust with operating cashflows comparable with FY08 and contributing to a further reduction in debt levels with expected debt repayments in excess of $30 million for the six months to 30 June 2009. Furthermore, Emeco continues to realise profits on disposal of its surplus assets.

Emeco CEO Mr Freedman said "the strong cashflow and debt reduction during a period of extraordinary market challenges highlights the business' cash generating capability. We will continue to focus on redeploying idle fleet and further debt reduction, while also continuing to reconfigure our fleet to meet changing market demands."

Looking forward, activity in the thermal coal and gold markets of New South Wales and Indonesia, and the recovering oil price, provides management with confidence in the outlook and a continuing recovery in utilisation into 1H FY10. Furthermore, EHL continues to see the emergence of opportunities resulting from the tighter credit environment. In particular, recent contract wins in Indonesia underscores these trends with utilisation expected to be fully restored in this business by end of 1Q FY10. However, the operating environment in some markets remains unclear due to the lack of visibility and is dependent on a broad based recovery in the global economy.

An internal review of EHL's European business is currently being undertaken following continuing underperformance. EHL expects to update the market at its full year results presentation in August, 2009 in relation to the outcome of this review which may give rise to one-off impairment and restructuring charges which are not included in the above guidance. The Company will also provide further detail in relation to the profit outlook for FY10.

The final result will be dependent on market conditions for the remainder of the year, and is subject to finalisation of the audit process.

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