Emeco sinks on big loss
UPDATE 2.25pm: Shares in Emeco fell after the mining equipment rental business posted a first-half loss of $179.8 million on a slowdown in the mining sector combined with goodwill and asset impairments.
The company also lowered its full-year operating EBITDA forecasts, despite predicting an improved performance in the second half.
Emeco's operating loss was $16.3 million on a 48.8 per cent slump in revenue to $126.4 million.
The company will not pay an interim dividend after declaring a 2.5 cent return in the previous corresponding period.
Emeco said its ongoing capacity to generate significant free cashflow had enabled it to direct $75 million to reduce debt over the period.
Managing director Ken Lewsey said the challenging and competitive operating environment caused by softness in mining activity had affected the company's performance in the December half.
"It was no doubt a difficult half for Emeco with our earnings and margins lower, but I am pleased that we made good progress on our strategy of focussing on those things we can control," he said.
"This included prudent measures such as restricting capital expenditure to maintaining existing assets and using our solid cashflow from operations and asset sales to reduce our net debt position.
"Pleasingly, our tendering activity last year is now converting to a number of new contracts being recently secured which is translating into higher utilisation and is already generating improved earnings in the second half."
Emeco said it expected an improvement in earnings in the second half, however it lowered its full-year operating EBITDA forecast from $90-$105 million to $82-$94 million.
Mr Lewsey said the revised full-year earnings outlook was due to the slower than expected award and commencement of new contracts.
However, the expected increase in second half earnings implied in the full year guidance was based on recent contract wins with some further wins assumed through the second half.
"Emeco is currently experiencing an improvement in utilisation which supports higher earnings in the second half," Mr Lewsey said.
"This improvement is underpinned by high activity levels in the Canadian oil sands market over winter, recent contract wins in Australia and Chile, and further growth from the conversion of business development opportunities across these three markets."
"We expect any further recovery in activity to be gradual across our markets, however, we believe our quality fleet, ability to execute and leading safety performance are key strengths that position the company well to continue winning work in the current competitive market."
Emeco shares closed off half a cent, or 1.85 per cent, at 26.5 cents after touching an intraday low of 25 cents.
