Brisbane based testing group, ALS (ALQ) upset the market yesterday afternoon with a realistic, but nevertheless gloomy first half profit forecast at the annual meeting in Brisbane.
The company’s chair, Nerolie Whitnall told the meeting that the company is looking at a 26% fall in interim profit in the year to September 30.
ALS is due to report the first half results on November 24.
Yesterday’s update certainly warned the market not to expect a surprise.
"It is expected that underlying net profit after tax for the half year ending 30 September 2014 will be approximately $74 million, 26.5% below the $100.7 million achieved in the first half of last year," the chair told the meeting.
When that news filtered out, the shares were sold off, ending the afternoon down 6.7% at $7.74. It was one of the biggest falls among the major ASX 200 companies on a day when the wider market edged back into the black – just.
ALQ 1Y – ALS shares slump on gloomy profit forecast
Ms Whitnall’s guidance was comprehensive, with the message about the condition of the company’s markets unchanged in tone from the final profit commentary a couple of months ago.
But there was a couple of glimmers of hope – the industrial business is enjoying higher sales and earnings and the Life Sciences is business is starting to see a pick up in conditions.
"We continue to see volatility in our markets," she told shareholders.
"The Minerals Division, and the geochemical business in particular, continues to face very challenging market conditions.
"Whilst there are some slight positive signs around global mineral exploration, including more recent capital raisings in the sector on the Toronto exchange; a likely increase in drilling activity in the second half of calendar 2014 in South America; a positive supply/demand dynamic for metals in general; and commodity prices whilst off more recent highs are still relatively strong, we are yet to see conditions on the ground translate into increased sample volumes.
"Whilst pricing for our services remains stable, we have seen geochemical sample flows in the June quarter down 27% on the same quarter last year; with Canada being particularly challenging.
"Sample volumes are steadily increasing as we move into the traditional field season and we remain of the opinion that we have reached the bottom of the cycle and a modest recovery is not too far away.
"The Energy Division’s year to date revenue has been affected by market conditions in respect to both its Coal operations and the Oil and Gas services business.
"Significant rate reductions in the coal industry and anticipated demand in the Northern Hemisphere relating to oil and gas work being pushed out into the September quarter impacted the first quarter.
"We have seen a build-up of work through July and the September quarter is looking strong across all our Oil and Gas business streams.
"The Life Sciences Division is expected to perform slightly ahead of the first half last year, while the Industrial Division’s June year to date revenue and EBIT are up 20% and 44% respectively on the same period last year, mainly on the back of its Asset Care business which has seen outages previously postponed now starting to flow through.
"Obviously the strong Australian dollar is also impacting, as it dampens activity here in Australia and decreases the value of our overseas earnings.
"This guidance assumes no material change in market activity levels and no material adverse events in the Group’s business activities for the remainder of the first half of the 2015 financial year," she added.
In the year to March, ALS reported an underlying net profit after tax of $172 million.
The net profit was was down 28% and excluded amortisation of acquired intangibles, restructuring and related costs, divestment losses and acquisition costs.
Revenue of $1.5 billion was up 3.3% on the $1.45 billion recorded from continuing operations in the 2013 financial year. Statutory net profit after tax was $154 million.
