Jobs to go as Bradken tightens belt
The company, which makes mining equipment such as rigs and railway cars, reported a net profit of $66.9 million on Tuesday - down 33 per cent from a year earlier.
Despite a 10 per cent fall in revenue, it blamed the profit slump on $30.4 million in legal costs relating to a Federal Court case against it.
In March, the company, a director - former NSW premier Nick Greiner - and managing director Brian Hodges were ordered to pay $21.6 million in damages to Swiss group Pala after they were found to have rigged a deal to buy Pala's mining parts manufacturer Norcast for less than it was worth. The company and its directors are appealing the case.
On Tuesday, Bradken warned it would continue to cut operating and overhead costs, "in line with the lower activity levels and to reduce working capital".
Over the past year it has shed more than 1000 jobs from its Australian and US divisions to counteract the fall in mining investment during the period.
"The first half of full year 2014 will be challenging, but overall we expect the year to be broadly comparable with full year 2013," it said.
Bell Potter Securities analyst John O'Shea estimated the company would shed another 500 jobs by December. "It's currently at 5425 [employees], and I think that number will head towards 5000 in the current half," he said.
The market responded positively to the results, sending the share price up 12.4 per cent to $5.89. Mr O'Shea said investors were buoyed by the company's strong operating cashflow, which was up 80 per cent at $217 million.
"When times are pretty difficult, Bradken has always had a pretty good track record in terms of being able to manage its working capital and pull costs out of the business," he said.
Bradken has fared a lot better than other companies in the sector, due in part to the fact that it is exposed to the end of the mining food chain - production - rather than the beginning - construction.
The company will pay a final dividend of 18¢ per share on September 13.
Frequently Asked Questions about this Article…
Bradken reported a net profit of $66.9 million, down 33% year‑on‑year. The company cited a 10% fall in revenue and about $30.4 million in legal costs related to a Federal Court case as major drivers of the profit decline.
Bradken has shed more than 1,000 jobs across its Australian and US divisions over the past year to counter lower mining investment. Analyst John O'Shea of Bell Potter estimated the company could cut another ~500 jobs by December (from around 5,425 employees toward about 5,000).
The market responded positively, sending Bradken's share price up 12.4% to $5.89. Investors were encouraged by strong operating cashflow (up 80% to $217 million) and management's ability to control working capital and pull costs out of the business.
Yes. Bradken will pay a final dividend of 18¢ per share, scheduled for payment on September 13.
Bradken's operating cashflow rose 80% to $217 million. Strong operating cashflow matters because it helps the company manage working capital, fund operations during downturns and gives investors confidence in short‑term liquidity and resilience.
In March, a court ordered Bradken, a director (former NSW premier Nick Greiner) and managing director Brian Hodges to pay $21.6 million in damages to Swiss group Pala over a deal for Norcast. Bradken and its directors are appealing the decision, and related legal costs of about $30.4 million hit the company's profit.
Bradken warned the first half of the full year 2014 would be challenging but said it expects the full year to be broadly comparable with 2013. The company plans to continue cutting operating and overhead costs in line with lower activity levels and to reduce working capital.
Bradken manufactures mining equipment such as rigs and railway cars and is exposed to the production end of the mining chain (operations/production) rather than the construction end. That exposure has helped it fare better than some peers during the slowdown in mining investment.
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