Bradken and Boom to add clarity to mining services outlook

Uncapped 100 investors should focus on Bradken's order book and Boom Logistic's potential capital return when the two mining services post their full-year reports tomorrow.

Uncapped 100 followers should brace for the onslaught of earnings news as the pace of profit releases picks up a notch from tomorrow.

Investors will likely be keenly listening to what the likes of mining services companies Bradken (BKN) and Boom Logistics (BOL) have to say about the outlook of the industry given the amount of fear in the sector.

The interesting thing is that early indications are that things in the industry hit by a sharp slowdown in capital spending are not as dire as feared, with WDS (WDS) and Downer EDI (DOW) actually managing to please the market.

The key question for Bradken is whether there is any change to its order book with management last stating that the decline in forward orders have stabilised, although it warned that underlying 2012-13 earnings before interest, tax, depreciation and amortisation (EBITDA) will dip 4.5% to around $210 million.

Interestingly, analysts are a little more bullish as they are forecasting EBITDA to come in flat at $215.8 million even as sales soften about 6% to $1.36 billion.

While that is a great outcome in view of the challenges plaguing the industry, a legal case against the company regarding the acquisition of Norcast is hanging over the company. Bradken’s bottom line will have to take around a $29 million hit as the company has to set aside the cash for a potentially adverse finding from the Court of Appeal.

Uncapped 100 stock Boom Logistics is also under a cloud after it lost a key contract with BHP Billiton. Its exposure to the struggling coal sector is also not helping sentiment with the crane hire company issuing a profit warning on May 1.

Management appears to be confident that it will be able to find new work to replace the BHP contract, which contributed $1.68 million to its earnings before interest and tax in the 11 months to May this year.

However, the key to watch for here is news on any potential capital return as management has indicated that cash flows will be up strongly due to a cut back in the amount if investments it needed to make in the business and asset sales.

Consensus estimates from Bloomberg are tipping around an 18% decline in adjusted net profit to $13.3 million, although sales are expected to firm around 2% to $355.8 million.

Bradken is trading 6 cents higher at $5.11 this morning, while Boom is down 0.5 cents at 14.5 cents.