Underperforming engineering group Bradken (BKN) didn’t disappoint investors bearish on the stock when it produced yet another poor financial year report yesterday thanks to the continuing impact of the downturn in spending in the resources sector.
As a result the shares were (again) sold off sharply by investors exasperated at another full-year loss.
While Bradken its full-year loss from $241 million last year to $196 million (an improvement of around 19%) the underlying outcome wasn’t pretty either.
Underlying profit was a weak $29 million profit, down 13% from 2014-15.
That was on a 15% slump in sales to $819 million, which the company said should be seen in the context of continued global softness and lack of capital projects in mining energy and related service sectors. Bradken again did not declare a dividend.
Total work in hand remained largely unchanged from last year at $370 million.
A small positive was the news that the company has cut its debt by 12% to $352 million by the end of June.
Bradken chief executive Paul Zuckerman described the result as solid given continued subdued markets with second-half earnings exceeding the first-half as conditions stabilised.
Bradken shares fell sharply to a day’s low of $1.70 in early trading because of the weak performance, and the admission in the company’s outlook that things were not going to improve quickly. But they rebounded in afternoon trading to end at $2.14, down just 1.8%.
"Management expects the current outlook for the commodity market to remain unchanged in FY17, with steady production levels to continue across most commodities in key markets and capital expenditure to remain subdued,” Bradken directors said in the statement to the ASX.
"The fundamentals in the mining industry remain stable and while capital growth is not expected to return until FY18, underlying global run-of-mine output is growing steadily at 3% to 5% per year. North American defence and energy market spending is expected to rise by 5% p.a. over the next four years, however industrial spending is likely to continue to decline.
"Given the above, management expects FY17 underlying EBITDA to be in line with reported FY16 underlying EBITDA, based on current market activity. However, benefits from ongoing transformation activities should begin to contribute to overall company performance. Bradken will remain clearly focused on improving the free cash flow of the business and will apply all free cash to further reducing net debt,” directors concluded.
