A big day yesterday for earthmoving equipment provider, Emeco Holdings.
It revealed in a statement to the ASX that it is pulling back and reshaping its business to concentrate on mining and taking total write-offs and impairment charges of more than $70 million.
As a result of the company’s review, Emeco said it would focus on servicing mining customers and will exit civil infrastructure markets.
Emeco will divest its Victorian civil equipment rental business, and downsize and restructure its Australian sales and parts business to make it more suitable for its focus on mining, the company said.
But operating profit for the June 30 year is on track and within previous guidance.
Emeco said net profit after tax would be in the range of $40 million to $41 million, in line with its previous guidance of $40 million to $44 million.
The shares rose 2.5c to 60.5c yesterday
The company confirmed the cost of USA and European closure and restructuring charges are expected to be approximately $30 million ($16 million non-cash), inclusive of the anticipated costs involved in selling the US Parts business. "This is in line with previous guidance of $29.5 million," it said.
There will be a further $43 million in goodwill impairment and restructuring charges costs from the decision to sell the Victorian Rental business and restructure the Australian Sales and Parts businesses.
"We are pleased to have the closure of the underperforming USA rental and European businesses behind us. Completing these projects within our targeted timeframe and in-line with cost expectations is an important step forward for the organisation," Emeco chief executive, Keith Gordon, said in the statement
"Notwithstanding the short term costs to effect the strategic decisions for Victorian Rental, Australian Sales and Parts, the release of underperforming capital from these businesses will enable Emeco to deliver shareholder value through incremental investment in our core markets or through capital management initiatives.
"FY10 has been a challenging year for many companies in the mining services sector as we emerged from a severe downturn.
"However, the delivery of this operating result, which is in line with guidance, provides a solid foundation to move forward into FY11 and beyond," the company said in the statement.
Emeco releases its full year results on August 25.
The restructuring and closures are estimated to free up $60 million in surplus working capital in the 2011 financial year, the company said yesterday.
Emeco said it will now focus on core mining markets and customers in Australia, Indonesia and Canada, where the outlook for bulk commodities, gold and oil sands is robust.
