Resource boom boosts business for Fleetwood

SEVERAL WA companies will benefit from the Government’s program to push local manufacturers and suppliers toward major projects in the North West.

After a visit to the Pilbara this week, State Development Minister Clive Brown launched an Australian Industry Participation Plan involving the State and Federal governments through the Department of Industry and Technology, the Office of Major Projects and the Industrial Supplies Office.

The Australian Industry Participation Plan – such as the one involving BHP Billiton’s $350 million Area C Project in the central Pilbara and BHP Billiton’s $659 million products and capacity expansion project at Port Hedland – is expected to generate new employment and business opportunities.

These two projects are expected to generate more than 1,000 jobs during the construction phase and more than 200 jobs during operation.

Besides engineering firms, one company standing out to deliver under the program will be caravan manufacturer Fleetwood.

As the main accommodation provider for resource projects in the Karratha and Port Hedland regions, Fleetwood is expected to receive a significant boost to business through mining contracts.

And it won’t just be those projects covered by the Industry Participation Plan that will provide an impetus for business, but also gas-related projects for the Burrup peninsular such as the Burrup Fertiliser, the Syntroleum Methanex and Dampier Nitrogen projects.

While these are expected to have a considerable impact on Fleetwood’s earnings, the impact will not be felt until the 2003-04 financial year.

In the meantime, Paterson Ord Minnett analyst Robert Gee believes the recreational and retirement businesses will continue to enjoy solid growth. Mr Gee said the company would go to the market for equity raising in 12 months to finance infrastructure development in Karratha.

“Fleetwood provides a low-risk exposure to the potential resource boom in the North West, hence the buy recommendation,” Mr Gee

ays in the stockbroker’s weekly brief.

Fleetwood reported a 70 per cent lift in profit to $7.6 million, on sales of $166.7 million, during the past financial year.

While the company will get a lift in manufacturing orders for the North West, its caravan park division will also benefit from the resource activity. Fleetwood owns three major parks in the Karratha region. The three parks are currently under-utilised and capable of being expanded.

The profit forecasts include growth in revenues of 15 per cent, which fails to reflect the real potential of the business if the North West Shelf projects come good. In this case it could go well beyond revenue of $200 million by the 2004 financial year.

And the company is ready to capitalise on any gains. Its net debt-to-equity ratio has fallen from 95.2 per cent to 58.4 per cent during the past financial year. Within two years debt to equity is expected to fall to 22.4 per cent or $13.5 million.

Earlier this week the company was trading at $2.66, 30 cents off its 52-week high a month ago. But it is a long way ahead of its $1.25 low touched on in September last year. The price gives the company a market capitalisation of $97.7 million.

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