Emeco to close Indon business
UPDATE 2.25pm: Shares in Emeco fell after the heavy mining equipment company issued a full-year profit warning and announced it had decided to exit its Indonesian business.
The company warned its forecast for full-year operating EBITDA was now $72-$75 million, down from previous guidance of $82-$94 million.
Emeco attributed the lower than expected profit to underutilisation of its fleet.
It specifically referred to earlier than expected cessation of the winter works program in oil sands as a result of abnormally warm weather in Western Canada, an unplanned outage for its biggest customer in Canada temporarily reducing earthmoving volumes and slower than expected contract awards in Australia.
The company also announced the closure of its Indonesia business following a review which predicted poor earnings from the business over the long-term given the unfavourable conditions in the local mining industry.
Managing director Ken Lewsey said the dynamics of the Indonesian mining industry did not support the company maintaining an ongoing presence.
"Closing the Indonesian business removes an operation that has been loss making in recent years and releases capital which can be directed towards other opportunities in the future," he said.
"This will also allow us to focus our time on driving improved utilisation across our three core markets of Australia, Canada and Chile and also exploring broader strategic options for the company."
The closure will result in a $41 million pre-tax charge and further non-cash charges of $13.5 million.
However the company said the exit from Indonesia would remove operating costs of about $3.5 million a year and Emeco would realise cash of about $40 million in the second half, which included assets already sold during the half.
Additional fleet of about $10 million would be relocated to the Australian business.
Emeco said it had net debt of $328 million with cash on hand of $40 million.
It plans to release its full-year results on August 21.
Emeco shares closed down 1.5 cents, or 5.66 per cent, at 25 cents after hitting an intraday low of 23 cents.
