Tight rein on costs keeps ALS buoyant
Earnings a share rose slightly, to 66.44¢ from 65.90¢, with the net profit ahead to $230.5 million from $224.7 million. After taking into account foreign exchange movements, profit fell to $200.1 million from $217.6 million.
Investor sentiment was buoyed by optimism that the downturn in the minerals sectors on earnings has been contained.
The flow of samples to its geochemical laboratories slipped just 2 per cent for the full year, although this masked an 18 per cent slump in the second half.
However, aggressive cost cutting limited the profit impact, with staff in the metallurgy and geochemical units cut by 29 per cent to below 4000 full-time equivalent positions.
Even so, margins were squeezed, with the pre-tax profit margin dropping to 34.7 per cent from 36.3 per cent a year earlier.
Helping to lift the shares on Monday was confirmation that the shift in its earnings mix had helped to maintain earnings, brokers said.
This reflected the contribution from the life sciences unit and the fact that the latest downturn in the mining sector has been slower in coming, which has given management more time to move in to reduce costs.
The company was upbeat on this score, while recent acquisitions will buoy revenue in the year ahead.
"In more recent years the focus for the company's growth and diversification has been into new testing markets; including industrial testing, food and pharmaceuticals, as well as geographical growth of our environmental businesses," the chairwoman, Nerolie Withnall, said.
"This has reduced our exposure to the cyclical downturn in the minerals sector."
The group's core coal business is Australian-based, where the industry "is under considerable cost pressures".
"Conditions are not expected to improve in the near future and the focus ... is on ... cost cutting, and productivity improvements to ensure [profit] margins are maintained above 20 per cent," managing director Greg Kilmister said.
The final dividend was raised 1¢ to 27¢ a share.
Frequently Asked Questions about this Article…
ALS reported earnings per share of 66.44¢, up slightly from 65.90¢ a year earlier. Net profit rose to $230.5 million from $224.7 million, but after taking foreign exchange movements into account profit fell to $200.1 million from $217.6 million.
The mining downturn weighed on ALS's geochemical business: sample flow to geochemical laboratories slipped 2% for the full year and experienced an 18% slump in the second half, indicating weaker demand from the resources sector.
ALS implemented aggressive cost cuts, reducing staff in its metallurgy and geochemical units by 29% to below 4,000 full‑time equivalent positions, which helped limit the profit impact from lower volumes.
Despite cost reductions, ALS's pre‑tax profit margin was squeezed to 34.7% from 36.3% the previous year, reflecting margin pressure even after efficiency measures.
ALS has been shifting its earnings mix into new testing markets—such as industrial testing, food and pharmaceuticals—and expanding geographically in environmental services, with contribution from the life sciences unit helping to maintain earnings.
Management said the Australian core coal business faces considerable cost pressures and conditions aren't expected to improve soon. The focus is on cost cutting and productivity improvements to maintain profit margins above 20%, according to managing director Greg Kilmister.
Yes. The company said recent acquisitions will support revenue growth in the coming year, and brokers noted that the shift in ALS's earnings mix—including life sciences contributions—has helped sustain earnings.
ALS increased its final dividend by 1¢ to 27¢ a share, reflecting management's confidence in maintaining returns despite the tougher mining market.
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