Emeco Expects Small Profit Drop in Fiscal First Half

Emeco Holdings presented its preliminary review of trading in its fiscal first half of 2008, expecting net profit after tax of about AU $30.5 million (U.S. $27.5 million), compared with the corresponding period pro forma NPAT of $34.8 million.

“We are disappointed with the earnings of the group over the first half driven mainly by the challenging conditions for our international businesses, particularly our operations in the U.S. and Indonesia,” said Emeco managing director Laurie Freeman.

“Notwithstanding weakness in our international operations, earnings of our Australian businesses during the first half of fiscal year 2008 exceeded earnings during the first half of fiscal year 2007. We expect an improvement from each of our international operations in the second half of the year as their markets improve and demand increases.”

The main contributors to weakness in the fiscal first half included continuing losses in U.S. business. Emeco’s U.S. business is in its start-up phase and lost about $4 million EBIT in the six months ended Dec. 31, 2007. However, based on recent contract awards, the company expects to break even in the third quarter and move into profitability in the fourth quarter.

A slower-than-anticipated recover in Indonesia also contributed, with asset utilization dropping to an unprecedented low in the half but had improved significantly by the end of the period. The company expects improvement in its fiscal second half.

Disruption to oil and gas demand in Canada also affected Canadian utilization. Emeco is experiencing a pick up in demand for larger equipment in the Alberta Oil Sands region.

Emeco’s rental model continues to gain acceptance among its customers, the company said. The proportion of Emeco’s blue chip mining rental customers is growing and the company is seeing increased enquiry in relation to new projects from mining and construction companies.

Emeco’s half-year results will be released Feb. 19.

Based in Perth, Australia, with U.S. headquarters in Houston, Emeco North America is No. 62 on the RER 100.

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