Good vibrations for RCR

WESTERN Australian-based integrated engineering company RCR Tomlinson Ltd has secured the rights to commercialise development of a revolutionary particle classification system, or rotary classifier.

The commercialisation of the technology, developed by CSIRO researchers, is expected to open a window to a new $100 million market for RCR.

The rotary classifier could be used as an effective and low-cost alternative to vibrating screens currently used by the Australian mining industry.

RCR managing director John Linden said a pilot plant was expected to be up and running within the next two years. A research agreement with CSIRO provides for RCR to manu-facture and sell the classifier alongside its existing range of apron feeder and scrubber pro-ducts.

“We are very impressed with its potential as a better method of sorting mined ore and a contributor to improved efficiency in the treatment of mined ores worldwide,” Mr Linden said.

The news sparked some new interest in the firm from investors. RCR’s share price climbed more than 7 per cent to around 22 cents earlier this week.

In the past 12 months the company’s shares have halved from 38 cents to its current position of 22 cents, giving it a market capitalisation of around $9 million. This despite it recently reporting a 13 per cent increase in revenue in the first half of 2002-03 to $43.7 million.

It is now trading at a 55 per cent discount to its net tangible asset backing of 46 cents per share, up from 42 cents in the previous corresponding half.

Hartleys analyst Steven Piotrowski, who earlier this year suggested shareholders should maintain a wait-and-see position on the company, has recently espoused a more positive future for the firm.

In a report on the company released following the half-yearly results, Mr Piotrowski said he believed the reasons for the depressed share price included concerns about the company’s balance sheet position, and scepticism about future earnings per share growth.

However, Mr Piotrowski now believes the shares are trading well below their value in terms of asset backing and in earnings potential.

He said its price-to-earnings ratio was just 4.5 per cent, compared with the industry average of between 7 per cent and 9 per cent. Using this benchmark, Mr Piotrowski expects the shares represent good value up to 30 cents a share.

And while revenue figures remain healthy, the company is working within margins that provide little room for error – a point Mr Linden told WA Business News he had been addressing for the past eight months.

In the first half of the 2002-03 year the company managed a net profit after tax of $850,000, down 24 per cent on the previous period.

Losses incurred on the completed Edendale boiler contract, which reduced underlying profit by around $200,000, and the suspension of the contract to supply three boilers to the Gouro nickel project in New Caledonia, were blamed for the trading performance.

The company has set its sights on achieving a profit after tax of 3.5 per cent on sales. Last year it worked on improving and streamlining management systems across the company’s various locations around Australia with the aim of increasing productivity by a minimum 15 per cent.

Mr Linden said the company was focusing on utilising its patented designs and developing its own niche markets in order to maintain and build healthier margins, rather than relying solely on tendering for jobs in the open market.

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