Emeco revenue higher as Australian miners seek operational continuity

Mining equipment rental company set up for stronger FY22 results

Major Australian heavy earthmoving equipment hirer Emeco has reported 25% stronger revenue, year-on-year, and says it is on track to achieve better full-year EBITDA of A$250-260 million as mining customers continue to grapple with new equipment availability issues.

FY22 first-half EBITDA came in at $122m, within Emeco’s $120-125m guidance range, while revenue climbed to $373m versus $299m in the first half of FY21. The company’s total FY21 revenue was $620m and EBITDA $238m.

Net profit after tax for the first six months of this year was $30.2m, up 900% on the same time last year.

Emeco said “metals” revenue in the latest half was 68%, compared with 57% in the first half of FY21, with thermal coal (13% of revenue) and metallurgical coal at 32%.

The company is seeking a better commodity exposure mix and has also shifted fleet from Australia’s east to the west to position it for metals growth. Meanwhile, the Pit N Portal business acquired for $72m in 2020 has since more than doubled in size (while EBITDA margins have halved), with FY22 first-half revenue at $128m and EBITDA at $16.4m.

Emeco said it expected a “stable” second half for Pit N Portal as it executed existing work.

Meanwhile, it had seen “significant growth” in its western region and expected more growth subject to resolution of ongoing labour shortage issues in Western Australia’s mining industry.

“We were 80% east coast and 20% west coast [prior to COVID], but with the [company’s] re-positioning, we’re more like 65%/25% and with that brings corresponding commodity diversification,” managing director Ian Testrow said.

Shifting of about 60 assets to the west had come with “some cost impact on margins”.

“I’m confident with our investment in people and our realignment of our fleet that we’ve set this business up for sustained growth and a very healthy business moving forward,” Testrow said.

He said Pit N Portal was “unrecognisable” from two years ago. While the unit’s 14% return on investment in the first half was below its expected 20%, Testrow said he was confident the leadership team would reach this target in FY23.

“[Pit N Portal] delivered very strong revenue growth as existing and new contracts ramped up, demonstrating our ability to win and successfully execute project start-ups in an exceptionally tight labour market,” he said. “However, margins were impacted by start-up costs associated with new projects, development phases of existing projects [lower margin than production] and the allocation of rental equipment to support the growth of the services business.”

Emeco’s Force Workshops business generated total revenue of $85.5m compared with $80.5m in the first half of FY21. External revenue was reported as $41.1m for FY22 H1 versus $40.7m in the same period in FY21. Testrow said the workshop arm was “crucial to our business and gives us a competitive advantage”.

“We buy mid-life equipment and re-build, then send it out operating really well while having a cost advantage [on our competition] so it’s really important for us,” he said.

Emeco’s share price (ASX: EHL) is down about 25% in the past 12 months, capitalising the company at $480m.


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