Emeco parks Pit N Portal problems

Staff reporter

Major mining equipment rental and plant hire group Emeco delivered record FY23 revenue but a tempered earnings result on the back of the “reset” of the Pit N Portal contracting business after a problematic first half.

Emeco CEO Ian Testrow maintains the ASX-listed company is on a stronger footing in the wake of “both an exciting and challenging year” in which revenue rose 16% year-on-year to A$875 million, net profit was down 14% yoy to $59m, and $250.4m EBITDA that was marginally ahead of FY22.

Emeco said it saw a 21% improvement in operating EBITDA in the second half of FY23 versus the first half.

“Our results have been delivered against a backdrop of record demand for our equipment and services but tested by ongoing inflationary pressures across the business,” Testrow said.

“Our Pit N Portal portfolio was successfully de-risked and reset, including the renegotiation of rates with a key customer.

“Our rental business revenue grew by 19% over the year as we deployed fleet to meet strong customer demand and increased the number of fully maintained projects, in line with our strategy. Gross fleet utilisation increased to 93% driven by this new work.

“Rental operating EBITDA increased by $19.5 million to $259.7 million, an increase of 8% on FY22.”

Pit N Portal revenue fell by 10% yoy to $223.6m in FY23. Emeco said a second half turnaround was underpinned by renegotiation of a key contract and commencement of several new projects.

The company said its return on capital came in at 13% for the latest year. ROC excluding Pit N Portal of 18% was “well above cost of capital”.

Testrow said the outlook for FY24 was positive, with demand across all Emeco businesses expected to remain strong.

“We enter FY24 with strong momentum and are confident that our business model will enable us to deliver sustainable growth and deliver increased shareholder returns in FY24,” he said.

Emeco’s share price is down about 8% in the past month, capitalising the company at $340m.


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