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Bradken cuts costs as profits droop

MINING services company Bradken has declared a 33% year-on-year fall in net profit for fiscal 201...

Justin Niessner

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Net profit after tax for the year ending in June came in at $66.9 million, compared to $100.5 million for the same time last year.

This result included a pre-tax charge of $30.4 million related to a Federal Court hearing associated with Bradken’s acquisition of Canada’s Norcast Wear Solutions.

The case, in which Norcast alleged that Bradken engaged in bid rigging before eventually buying the company, resulted in a favourable ruling for the Canadian company.

Bradken said if its appeal of the ruling favourable to Norcast was successful, the one-off charge would be written back to profit for the year.

Statutory earnings before interest, taxes, depreciation and amortisation were down 17% to $183.6 million for the year.

The company emphasised, however, that underlying earnings before the costs resulting from the court action were $214 million, reflecting a decrease of just 2% on the previous year.

Sales revenue for the mining products division was up 4% on increased tonnes mined and uptake of new products, while the rail division continued to struggle with sales down 33% compared to last year at $223 million.

Bradken attributed volume reductions in the rail division to the general downturn in the resources sector.

It said reduction in tax payments and working capital lifted its full-year operating cash flow by 80% on last year to $217.6 million.

Capital expenditure was $96.7 million for the year, down from $131.9 million in the previous year.

Other cost-cutting measures included significant employment downsizing, with US staff down 15% and Australian staff down 14%, as the business reshaped to align with emerging market conditions.

Over the year, employment reduced from a high of 6500 workers to the current level of 5425.

Net debt levels decreased to $425.3 million from $442.8 million in the previous year after a payment of $26.7 million to the Federal Court.

Bradken managing director Brian Hodges offered an optimistic outlook, saying the company expected mine production to show steady increases in fiscal 2014 for most commodities.

“Miners will continue to restrict expenditure to improve cash flow due to weaker prices and high cost pressures which largely affect new equipment purchases and discretionary consumables, but we expect non-discretionary consumable sales to track production.,” he said.

“Ultimately, new capital equipment will be required and while some orders are returning, there is little visibility of a trend.

Hodges added that while the first half of fiscal 2014 would be challenging, the company expected it would be broadly comparable to 2013.

Shares in Bradken were up 6.9% today at $5.60.

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