Bradken shopping spree bolsters share price

SHARES in the Australian mining equipment supplier, Bradken, rose by nearly 4 per cent yesterday after it announced acquisitions which the company says will boost earnings by $28 million.

By InvestSMART · 8 Jul 2011

By InvestSMART ·
8 Jul 2011

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SHARES in the Australian mining equipment supplier, Bradken, rose by nearly 4 per cent yesterday after it announced acquisitions which the company says will boost earnings by $28 million.

Bradken will spend $222 million on the two acquisitions, including $202 million to take over the Canadian company, Norcast, and $20 million on a Wollongong operation, Australian and Overseas Alloys. The news saw the company's shares close 30? up, or 3.77 per cent, at $8.25.

It will become the largest global supplier of cast steel mill liners to mining regions through the Norcast takeover, Bradken said in a statement. It would also increase its market share in Australasia, North and South America and Africa.

"Norcast provides world-class manufacturing operations in Canada and a leading position in the global supply of mill liners," the managing director of Bradken, Brian Hodges, said. "AOA increases our presence in the Australian wear plate market and provides strong manufacturing technology."

Mr Hodges expected underlying pre-tax earnings growth in 2010-11 to be towards the middle of an earlier guidance range of 15 to 20 per cent, with 25 to 30 per cent in 2011-12 and net profit growth of 35 to 40 per cent.

In May, Bradken acquired Wear Protect Systems and two of its related companies for an initial payment of $13.3 million and an earn-out over two years.

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Frequently Asked Questions about this Article…

What acquisitions did Bradken announce and what was the total cost?

Bradken announced two purchases: a takeover of Canadian company Norcast for $202 million and a Wollongong operation, Australian and Overseas Alloys (AOA), for $20 million — a combined spend of $222 million.

How did Bradken's share price react to the acquisition news?

Bradken shares rose by nearly 4% after the announcement, closing up 3.77% at $8.25 the day the news was released.

By how much did Bradken say the acquisitions would boost earnings?

Bradken said the acquisitions would boost earnings by $28 million.

What strategic benefits does the Norcast takeover give Bradken?

Bradken said the Norcast takeover makes it the largest global supplier of cast steel mill liners to mining regions, adds world-class manufacturing operations in Canada and increases its market share across Australasia, North and South America and Africa.

What does the AOA Wollongong purchase add to Bradken's business?

Bradken said AOA increases its presence in the Australian wear-plate market and provides strong manufacturing technology through the Wollongong operation.

What earnings growth guidance did Bradken provide after the acquisitions?

Bradken's managing director expected underlying pre-tax earnings growth in 2010–11 to be towards the middle of an earlier 15–20% guidance range, 25–30% in 2011–12, and net profit growth of 35–40%.

Has Bradken completed other acquisitions recently?

Yes. In May, Bradken acquired Wear Protect Systems and two related companies for an initial payment of $13.3 million plus an earn-out payable over two years.

What do these acquisitions indicate about Bradken's growth strategy for investors to note?

The deals show Bradken pursuing growth through targeted acquisitions that expand manufacturing capability, increase market share in key regions and product lines (like mill liners and wear plates), and aim to lift earnings — all factors everyday investors often watch when assessing a company's expansion strategy.