The slump in the building and manufacturing sectors in the June 30 year caught industrial products company Crane Group which yesterday revealed 28% fall in full-year profit.
And the Sydney based company said it expects these difficult trading conditions to persist in the coming months, with expectations of little if any improvement in earnings, unless the economy recovers.
From comments made in yesterday’s statement to the ASX, the company isn’t expecting that to happen.
The tough trading conditions cut sales and profit margins, a double whammy.
The market picked up on that news and the gloomy outlook and marked down the shares by more than 9% or $1.05 to $10.07.
Crane management said that conditions for the coming financial year are expected to be at least as difficult as those experienced over the past year.
"In particular, the recession in New Zealand and the sharp decline in activity in the civil and water infrastructure sectors of the Australian pipelines market are expected to impact sales, margins and equity accounted earnings unfavourably in the coming year.
"Any recovery in building sector demand in Australia is not expected to positively impact Crane Group’s results until at least the second half of FY10.
"Earnings performance in FY10 will be supported by cost reduction initiatives undertaken during FY09, but results will be heavily dependent on trading conditions through the year.
"Volatility in the broader economy and the relatively short period of trading in the year to date make it difficult to definitively forecast future performance.
"However, unless sales demand during the year improves, it appears unlikely that FY10 profit after tax before significant items will exceed that of FY09," directors said.
Crane, a manufacturer of non-ferrous metal products, plastic pipeline systems and plumbing supplies, reported net profit of $43.6 million for the year to June, compared to $60.8 million in the 2008 year
Net profit before significant items fell 11.6% to $56.4 million, while revenue fell 9.9% to $2.1 billion in the 2009 year, a good indicator of just how tough the company found conditions.
Crane declared a fully franked final dividend of 28 cents per share, bringing total fully franked dividends for 2009 to 63 cents a share, compared to 71 cents a share in the previous financial year.
With the gloomy outlook, shareholders might have a struggle to see anything higher in dividends in the coming year.
Nearly all of Crane’s divisions reported lower revenue contributions during 2009, compared to the previous financial year.
In the Pipelines division, revenue fell 14% to $681 million due to lower sales to water infrastructure projects while in the Trade Distribution unit, results were mixed, with Tradelink’s revenue up 1% to $912 million, but revenue at Crane Distribution New Zealand (CDNZ) fell 18% $347 million because of the recession across the Tasman.
The company said the Metals Distribution unit had had a difficult year with revenue down 16% to $222 million due to the contraction in manufacturing activity, which significantly affected volumes, while weaker commodity prices put pressure on margins.
The company said its net debt at June 30 was $216.4 million, a fall of $121.8 million since December 31 last year, due primarily to lower working capital, reduced capital expenditure and equity raised via a $40 million placement in March 2009 and a $22.8 million Share Purchase Plan completed in April, 2009.
"The Group’s funding position was strengthened during the year with the renewal in February, 2009 of $140 million of banking facilities. Crane Group’s next major refinancing is not due until April 2011," directors said.
"Conservative gearing at 30 June, 2009 of 25.1% (measured as net debt to net debt plus equity) is below the Group’s target range of 30% to 40% and sees Crane Group well placed to take advantage of future growth opportunities as they arise. Net financing costs for the period were $29.9 million, down 4.5% on last year, reflecting lower debt levels and interest rates in the second half of the year."
