In the two months since late December 2011, Industrea’s mining equipment division has secured new diesel equipment contracts worth just over $27 million, including $14.5 million from Chinese customers and a first-up order from Vale Australia for $12.6 million.
Industrea is poised to benefit from a number of initiatives implemented in FY11 and FY12 as it reported an interim net profit of $15.1 million from revenues of $174.5 million, its managing director Robin Levison said.
“As a result of this investment we have the capacity, resources and product range to ensure Industrea secures maximum benefit from the current resources boom in our key markets of Australia, China, South America, South Africa and Russia” he said.
“We are confident of achieving a stronger revenue performance in the second half and that full year profit will lift given the underlying strength of the markets we operate in, and the continuing improvements being made to our businesses’ operational efficiencies.”
The initiatives include a $5 million investment made to further bolster its Australian operations by establishing a larger service centre for mining equipment division based in the Hunter Valley at Rutherford, further commitment of R&D funds to launch “next generation” diesel vehicles, and undertaking a capital expenditure program to enlarge its fleet.
“The significant lift in capacity at our new Rutherford servicing centre will deliver strong recurring revenue streams from the large fleet of underground diesel vehicles currently deployed in the Hunter Valley coalfields,” he said.
The stronger domestic demand was offset by lower revenues from Chinese customers during the historically slower first half, although several new contracts for diesel equipment orders were won with China Energy Coal, Datong, Baoji Qinyuan, Shenhua Ningmei and Yulin.
“Industrea remains confident about its near to longer-term prospects in China, with forecast coal production volume growth in China at above 8% over the next few years,” the company said.
“The continued consolidation and mechanisation of the country’s mines into larger, deeper and more complex operations are the environments Industrea’s specialist underground vehicles are tailor-made for.”
With over 150 of its IME vehicles operational in China’s high utilisation coal environment, increasing refurbishment opportunities are emerging for the recently established manufacturing and service facility there, with the fourth longwall carrier refurbishment currently underway, Industrea said.
New product R&D has continued during the first six months of FY12, with the objective of augmenting the current crop of “next generation” diesel equipment with new products by the end of this financial year.
Levison said Industrea’s investment in developing its own explosion protected underground drill rig and integrating it with its Drill Guidance System (DGS) tool, while creating some short-term financial pain in the first half, was a strategy that would deliver substantial longer-term gains.
“As part of this strategy we changed our previous DGS distribution arrangements in China following termination of our relationship with our previous drill rig supplier,” he said.
“While transitioning this arrangement resulted in an anticipated revenue and EBITA decline for Industrea in the first half, our streamlined distribution channel for the suite of products including our integrated methane gas drainage solution will certainly boost its future profits in that market,” he said.
Levison said that in February 2012 Industrea had made the first two sales of its new integrated methane gas drainage solution (Drill Rig, DGS and consumables) to two separate Chinese customers for around $5 million.
The $5 million revenue gained through the two complete integrated system sales was roughly equivalent in net terms to the sale of around eight separate DGS only units.
