MARKETS SPECTATOR: Engenco's rock bottom

Engenco chief executive Dennis Quinn says mining companies now have to spend.

“We have reached the bottom” in mining company spending, Quinn told Markets Spectator. “Resource companies have to spend on maintenance eventually. We’re long past the days of mine expansion and new capital spending. It will be replacement and maintenance."

Engenco today said its net loss for the 12 months to June 30 will be as much as $14 million compared with an earlier forecast of $12 million. Quinn predicts a return to profitability for the company in the 12 months to June next year.

Quinn says the company sells axles and services axles and transmissions for mining trucks and diggers. “Maintenance work has dropped off,” he says.

The drop in resources activity has seen mining locomotive usage ebb. Locomotives have been transferred to general freight work. There has been a resulting oversupply that has hurt Engenco’s locomotive leasing business.

Moreover, Engenco’s labour hire unit, used to maintain and repair railway tracks in areas such as the Hunter Valley, has not seen much demand because of a drop off in mining activity.

“The softness in our business is largely related to the resources sector,” says Quinn.

At 1401 Engenco shares were down 1 cent, or 5.9 per cent, to 16 cents. The benchmark S&P/ASX200 Index had fallen 30.306, or 0.6 per cent, to 4804.90. Engenco shares have plunged 73 per cent in the last 12 months.