I know two updates don’t make a trend, but there could be something emerging in an important sector of the market, mining services.
We should watch out for better than expected reports from the mining services sector, especially those groups dealing with iron ore, and the construction side of the mining and oil sector.
Those companies servicing mining and oil on the production side might have some poor news to report.
Worleyparsons, the big services group that specialises in the oil and gas sector (and is expanding into mining) is one of those and has already changed guidance and warned of a fall in interim and full year earnings.
A contributing factor here for Worleyparsons is the high value of the Australian dollar, especially against the US currency.
That is going to hurt companies with offshore revenues and earnings: Boart Longyear, Orica, Campbell Brothers and Leighton Holdings come to mind. Leighton will also be hurt by the slump in the Gulf.
But Leighton will benefit from the upturn in the Australian mining sector and rising infrastructure spending.
Macmahon Holdings has also warned of lower interim figures, but could be looking for an upturn. UGL is another in the sector to be watched.
Perth-based contractors like Monadelphous Group will see a pick up as the iron ore expansion continues and the huge WA LNG projects, like Gorgon, move to higher levels of activity.
Monday, the small Brisbane-based mining products provider Industrea Ltd, revealed that it expects second half profits to recover after a rough first half.
Industrea said it expected its mining services, diesel equipment, technology and international divisions to boost 2009-10 revenue to between $300 million and $330 million.
Adjusted net profit is expected to be between $48 million to $54 million.
In 2008-09 the company had revenues of $259.5 million and adjusted net profit was $45.4 million.
The company’s 2009-10 results are expected to mirror the recovery from the global financial crisis, Industrea said in its statement on Monday.
It said the first half of the fiscal year would reflect the depths of the crisis, with the second half showing a recovery led by China, together with its own actions to find replacement markets for lost business.
"As such, Industrea expects the first half result to December 31, 2009 to be materially different to the prior comparable period," it said.
During the first half, subsidiary Huddy’s Mining Services lost a contract at Xstrata’s Handlebar Hill zinc mine in Queensland and there was a delay in the timing of technology sales.
Company chief Robin Levison said Industrea had begun the new year on a positive note and was seeing robust trading conditions for the second half.
"Although Huddy’s has recently returned to Handlebar Hill, the Company expects an adjusted NPAT for the half year in the range of $17.2-$17.8 million (prior comparable period $24.6 million)," the company said.
"The recent upturn in global commodity markets and China’s renewed push towards improved productivity and safety in its underground coal mining industry had positioned Industrea to achieve increased revenue and profits for the full year to June 30, 2010," Mr Levison said.
"We are also actively pursuing our global diversification strategy, with growth in export orders to other markets including South Africa and South America also anticipated and with our spares pipeline continuing to rise in line with our overseas shipments.
"China though will remain the key market for Industrea," Mr Levison said.
Industrea shares rose 1 cent Monday to finish on 43.5c.
