Bradken H1 profit slips

Shares in Bradken (BKN) slumped as the group said it expects earnings slightly below analyst estimates for the full year after reporting a dip in first-half profit on the back of a "particularly challenging" six months.

At 1016 AEDT, Bradken shares fell 8.83% to $4.75, against a benchmark index fall of 0.2%.

The mining services group's net profit after tax for the six months to December 2013 was $38.1 million, an 18% decrease from the $46.7 million it posted in the six months to December 2012.

The group said net profit after tax was positively affected by a number of one-off abnormal deductions including revised research and development claims from prior years.

Sales revenue fell 17% to $563.6 million, compared with $680.5 million in the previous corresponding period.

Bradken said revenue for its mining products division fell, although margins lifted, as demand for ground engaging tools was flat across most regions with significant contraction in the Australian coal market.

Revenue from the mineral processing division lifted due to higher sales in Australia and Indonesia, although market demand slowed abruptly in the first half with customers destocking, delaying change-outs and cancelling or postponing new projects, the group said.

Rail division revenue fell due to lower demand for wagons but Bradken said robust systems introduced over the last two years continue to generate efficiencies, reduce costs and improve margins.

The foundry consumables business posted a fall in sales revenue due to a significant reduction in orders from Australian foundries and steel mills resulting from depressed market conditions which led to downsizing, Bradken said.

The group will pay a dividend of 15 cents per share, payable on March 21 to shareholders on the record on February 21.

This compares with a dividend of 20 cents per share in the previous corresponding period.

Earnings before interest, tax, depreciation and amortisation (EBITDA) was $86.2 million in the half, down 18% from $105.1 million in the prior corresponding period.

Group forecasts FY result below estimates

Bradken forecasts EBITDA of around $180 million for the full year, below consensus analyst estimates of $206.1 million.

Managing director Brian Hodges said the first six months of the year were "particularly challenging for Bradken with sales remaining at low levels".

But he noted the group had slightly exceeded its first-half guidance of $85 million EBITDA.

"Since June 2013, we have seen order intake levels strengthen for all consumable product ranges," Mr Hodges said.

"Mine production levels are continuing to increase and we expect sales to improve through the second half."

He said mining growth is steady and Bradken is pursuing opportunities to increase its scale or diversity its consumable product offering, noting the group's takeover offer for Austin Engineering.

Mr Hodges noted that although mine production volume growth continues to lift, mining capital expenditure is likely to remain at reduced levels.

The expanding United States economy is supporting growth in energy and capital products and for domestic infrastructure such as rail and construction, although this will likely take time to impact on sales revenue, the group said.