Australia's resources boom should ensure the best of times for mining services companies, but recent announcements from three listed Western Australian stocks indicate a mixed outlook.
Australia's resources boom should ensure the best of times for mining services companies, but recent announcements from three listed Western Australian stocks indicate a mixed outlook.
On the positive front, Ammtec announced last week that it expected to achieve a record profit in the half-year to December 2005.
Another company on the up and up is Imdex, which expects double digit revenue growth in the current financial year.
In contrast, Essa Australia recently scaled back its sales and profit forecasts, saying it would be hit by the impact of rising labour costs.
Bassendean-based Essa specialises in the design and manufacture of sampling equipment for the mining sector. It had a great year in 2004-05, with revenue and profit both growing strongly and comfortably exceeding prospectus forecasts.
In August it said it expected further solid growth in revenue and profit, but last month it revised those forecasts and now expects slower revenue growth to $17.8 million.
Profit is expected to drop to $1.65 million.
Chairman Dudley Kingsnorth told Essa’s annual meeting that the revisions were due to the “well documented shortage of engineering and manufacturing skills in the mining industry”.
He said the cost of labour had increased significantly, while its raw material costs had also increased as a result of the general rise in manufacturing costs.
“Third, and more significantly, the shortage of project engineering skills has led to historically long lead times between an enquiry being received and an order being placed for the larger systems,” Mr Kingsnorth said.
Balcatta-based Ammtec has managed to improve its margins and report a record profit in 2004-05.
It said last week that profit in the six months to December 2005 would increase to $2.5 million.
This would be up from $1.5 million in the half-year to December 2004 and $2 million in the half-year to June 2005.
The company attributed the improvement to its core metallurgical test work activity and its move to provide pilot plant scale testing.
Imdex announced last week it had raised $4 million to support growth in its business, which involves the supply of drilling products and services to the oil and gas and mining sectors.
In 2004-05, the company achieved 21 per cent revenue growth to $48.2 million and returned to the black, with a $3.1 million profit after the previous year’s $3.7 million loss.
Managing director Bernie Ridgeway said the company should be able to achieve its goal of a 15 per cent sales increase in the current year.
“Importantly, we have posted another margin improvement which should be sustained for the remainder of the financial year,” he said.
