Crunch went the shares yesterday in small mining services company Coffey International (COF). It will be the first of what will be a long line of miserably bad results from the sector.
Coffey shares slumped more than 17% to close at 24c following its weak interim profit announcement, with its earnings halved and interim dividend omitted.
Revenue fell 9% to $296 million, but after tax earnings plunged to just $1 million, half of last year’s figure.
Analysts said the important message from the report was the sharp fall in future revenues from the company’s Geosciences division, its most important business.
Coffey said contracted 12-month forward fee revenue in the Geoservices division was down 15% year-on-year at $86 million following slower than expected new contract awards.
That compares to the $101.6 million revenue for this division in the six months to December. That in turn was down 8% from the first half of the 2013-14 financial year.
COF 5Y – Mining services still under earnings pressure
Managing Director John Douglas said in a statement the company’s modest profit reflected a continued focus on the fundamentals in a difficult market.
“We’ve extended the maturity of our debt profile and continued to build capability as we match capacity to markets,” he said.
“Revenue in transport infrastructure and property grew, demonstrating we’re well positioned in our key markets. We continue to develop a strong client and revenue focus in a tough market.”
Mr Douglas said significant client market volatility had emerged since November 2014, including delays in infrastructure due to state government elections and lower oil, iron ore and copper prices.
The devaluing Australian dollar impacted Coffey’s debt position but will benefit the competitiveness of the international Geoservices business. The property market also remains strong.
The Australian aid budget has experienced some pressures during the half, although the UK has maintained bipartisan support for its aid funding target of 0.7% of gross national income.
“We’re actively managing and responding to market volatility, drawing on our diversified industry focus and strong market reputation,” Mr Douglas said.
