Emerging materials stocks on the Uncapped 100 that reported results this morning have knocked some wind out of the sector’s recovery efforts as their earnings and outlook failed to meet expectations.
Drilling services and products group Imdex (IMD) tumbled 8.6% to 69.5 cents, while aluminium products company Capral fell 21.1% to 15 cents in the first half an hour of trade.
While Imdex’s 14% drop in sales to $232.8 million was about what the market expected, the drilling services and products group posted a 58% plunge in net profit to $19.4 million compared with consensus expectations of $22 million for the year ended June 30, 2013.
What also disappointed investors was its dividend. The company paid 2.9 cents a share, or 60% less in the past financial year, when analysts had pencilled in 3.4 cents for 2012-13.
Its outlook for the current financial year is also cautious. Management warned of continued weak activity in the mining sector but strong demand from oil & gas customers.
However, mining constitutes 73% of the group’s business, so strength in energy won’t be able to completely offset the challenging operating conditions in the minerals industry.
Meanwhile, Capral’s first-half underlying earnings before interest, tax, depreciation and amortisation (EBITDA) swung to a loss of $700,000 compared with a $300,000 profit in the previous six-months to end June, 2012.
Weak demand for its products in key residential markets of Victoria and Queensland and intense competition weighed on its results.
If Capral doesn’t deliver a strong rebound in the current half, it won’t be able to meet full-year consensus forecast for EBITDA of $2.5 million and sales of $310 million.
Given the weak outlook for housing construction and business confidence, investors are worried that Capral will struggle to turnaround its profits, even though management is guiding for a full year EBITDA of between $2 million and $5 million.
Imdex and Capral are part of the Uncapped 100.