Surf’s up and swell’s building

PERTH integrated engineering firm RCR Tomlinson Ltd is riding a wave of new orders, which have brought the company out of the doldrums of the past two years.

Investors have been quick to reward the company, which returned a profit of $494,000 for the past year.

Over the past month, RCR Tomlinson’s share price has risen around 50 per cent as difficult loss-making trading conditions, which brought the company $563,000 in the red last year, turned to a profit of $494,000 for 2000-01 on increased revenue of 27.5 per cent to $60.4 million.

The company board also went “heavy” on its staff, telling them in July they would either have to lift their game or face possible closure of parts of the operations.

In a letter to shareholders three weeks ago, managing director John Linden said staff at the Bayswater precision machining and fitting facility, created following the 1998 RCR Engineering-Centurion Indus-tries merger, were given an ultimation that has since appeared to pay off.

“The challenge galvanised the Bayswater workforce into a more efficient, determined and motivated team, and the effort has paid off handsomely, with a worker productivity increase so far of 10 per cent and other performance figures rising strongly,” Mr Linden said.

“The new approach enabled the facility to maximise opportunities presented by an improving market and an earlier strategic decision to concentrate on supplying services to the mining industry that were

most compatible with its

areas of greatest expertise.”

The company had three major contracts for the mechanical services division in Welshpool valued at $8 million. It also has significant product orders for scrubbers and apron feeders in Bunbury valued at more than $3 million, for a Saudi Arabian gold mine, and water tube boilers and inert gas generators valued at around $3.5 million.

The company has won a further 12 orders for apron feeders from the WA mining industry.

In 2000, the company tripled the number of conveyor pulley overhauls, lifting its work rate from an average three per month up to nine.

The Welshpool facility recently won a contract from Australian company EWT Bedminster to construct an environmentally-friendly digester that speeds up the process of recycling waste material into compost.

The first of its kind in WA, the digester will weigh 360 tonnes and have an overall length of 70 metres. It will be transported to the Canning Vale site in eight sections, with completion scheduled for late April 2002.

The company also reached an agreement last week to supply repair and maintenance facilities and spare parts for the Kawasaki range of mine crushers in Australia.

Combined with an existing agreement with Metso

Minerals for the Nordberg

range of crushers, and an agreement to manufacture and service the Hazemag range of rotary impactors in Australia, RCR effectively controls the Australian crusher market.

DJ Charmicheal senior analyst Peter Strachan is particularly bullish about the future prospects of the engineering firm, which he believes has not been getting the attention it deserves.

In the short term, Mr Strachan is tipping that RCR could climb as high as 20 cents and go as high as 35 cents within the next two years.

The company, in the unique position of owning all of its properties, has a net asset backing of 39 cents a share.

“That’s a stock you can buy at 35 cents, hold for two years and it will be worth 35 cents and still be below its net asset backing,” he said.

A reduction of its net debt to equity ratio from 68 per cent to 60 per cent followed a $2 million reduction of debt in the past year.

Mr Strachan believes earnings will climb to 1.9 cents a share in the next year and 3.5 cents a share by 2003.

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