Despite an optimistic outlook for the second half, shares in Brisbane-based mining services group, Campbell Brothers were sold off yesterday by more than 2%.
The shares fell 62c to $32.45 after revealing that it expected to repeat the first half profit growth in the second half, now underway.
The company posted a 47.7% rise in first half net profit to $38.2 million, compared with the first six months of the 2006-07 year.
On an underlying basis, earnings were up a more sedate 25.4% at $32.658. The profit was struck on turnover of $366.60 million, up 13.1% from the $324.24 million in the first half of the previous year.
"Expectations are that underlying net profit after tax (excluding unusual items) for the full year to March 2008 will show a similar percentage increase to that achieved in the September 2007 half year," Campbell Brothers chairman Geoff McGrath said in a statement accompanying the profit.
On that basis it seems a reasonable return, but perhaps investors were spooked by the admission that the higher Australian dollar had cost the company $2 million in underlying earnings during the six months.
Mr McGrath said the strong improvement in net profit was achieved despite adverse effects of the strengthening Australian dollar on the translation of offshore earnings.
"By way of illustration, the average exchange rate used to translate US dollar earnings to Australian dollars in the six months to September 2007 was $US0.8448 compared with $US0.7560 for the previous corresponding period.
"The impact of this exchange rate movement has decreased the after tax profit for the first half by approximately $2 million."
To counteract the weakening of the US dollar over the past six months, the company's main profit and sales driver, the ALS Laboratory group had implemented a number of strategies, including reviewing prices and moving to non US dollar denominated contracts where appropriate.
Mr McGrath said the latest result was again driven by ALS which experienced ongoing growth due to buoyant market conditions and acquisitions in the previous financial year.
"ALS achieved significant increases in both revenue and profit contribution despite the unfavourable impact of foreign exchange rates during the year.
"The company will continue to focus on maintaining growth and ensuring it extracts the best possible return on its investments," he added.
Directors declared a partly franked (50%) interim dividend of 35c a share (2006: 28c, partly franked to 50%) which will be paid on December 17.
The company's Managing Director, Greg Kilmister said the results were derived from very strong market growth in minerals analysis across all regions and acquisitions in the environmental testing segment during the past year.
"ALS is continuing to invest in future growth through acquisitions and the opening of new laboratories. During the half year, ALS entered into joint venture arrangements with MMC Norilsk Nickel in Russia and JK Tech Pty Ltd in Australia.
"On 1 September 2007, ALS acquired e-Lab in the USA. e-Lab are an environmental laboratory group with operations in Texas and Michigan. On 1 October 2007, ALS acquired ACIRL Pty Ltd, an Australian provider of analytical and technology services to the black coal industry, for $76.8 million", Mr Kilmister said.
The Chemicals segment delivered improvements in revenue and contribution from both the Industrial Chemical and Panamex Pacific business units during the half year. "Panamex Pacific has enjoyed increased sales in strategically important markets and has started to show the benefit from cost control initiatives introduced in the previous financial year.
"The Industrial Chemical division produced an improved result despite tightening margins, assisted by a robust approach to controlling overheads", Mr Kilmister said. Mr Kilmister added that both business units will concentrate on deriving continued growth from a focus on servicing their key markets. The consumer products contract manufacturing business was divested at the end of September 2007.
"Reward Distribution experienced a fall in contribution despite increased revenue during the six months to September 2007. "The business has continued to incur high levels of integration and restructuring costs as it rationalises products, warehouses, IT systems and administrative functions across its national network.
"Most of the systems required to run Reward as a truly national distribution group have now been put in place, and the business can focus its efforts on sales and customer service with the confidence in knowing it can now deliver a superior total service.
"The strategy to ensure the future profitable growth of Reward Distribution will continue to be implemented during the coming months and is expected to deliver benefits by the end of the current financial year. The business will concentrate on deriving maximum value from being a professionally managed distributor in a national market", Mr Kilmister stated.
