Momentum with Emeco’s Pit N Portal (PNP) underground contract mining business it says is accelerating, with activity levels continuing to increase in line with expectations. “We are seeing steady growth in demand for our underground mining fleet and good momentum in mining services activity.” However, the company now anticipates that H2 2021 earnings will be broadly consistent with H1 2021. “Project commissioning issues have compromised productivity in some early stage works which has temporarily impacted profitability. A full review of the issues has been undertaken and mitigation measures have been implemented to restore operating performance and regain profitability levels, with positive results to date. We anticipate profitability levels to improve throughout the current half and the identified issues are not expected to impact FY22 performance.”
In addition to previously announced growth capital expenditure of A$27 million for FY21, Emeco announces that it has reached an in-principle agreement to acquire a package of high-quality underground equipment for A$14 million, including expected rebuild costs. “This transaction supports Pit N Portal’s ability to meet current and anticipated growth in customer demand for well maintained, low cost mid-life specialist underground equipment. Because the equipment is located in Australia, we are able to quickly deploy some assets to existing customers, with the remainder of the equipment package to be sent to our Force workshops for cost-effective maintenance and rebuilds before deployment to existing and new customers throughout FY22.”
Emeco CEO, Ian Testrow commented: “We are delighted with this valuable deal and believe it demonstrates our ability to source in-demand assets at attractive prices and utilise our capabilities to deliver strong returns. The opportunity to secure this sought-after equipment package will be in line with our strategy of disciplined deployment of our free cash to deliver growth and create shareholder value. The strength of our balance sheet and our strong cash generation continue to provide capital allocation optionality to invest in the business and return capital to shareholders, including dividends and share buybacks, to maximise shareholder returns. Our ability to utilise Force workshops to enhance the value of this package allows us to take advantage of the strong customer demand for high quality underground equipment and deliver continued earnings growth.”
He added: “Going forward, we are in a strong position to capitalise on favourable market conditions across each of our businesses. Our Rental Division has performed to expectations and is gaining momentum. Having acted decisively to address some challenging short-term conditions in Pit N Portal projects, we are confident in the continued growth opportunities. We are committed to support this growth with disciplined capital expenditure where we can meet our strict return hurdles.”
Pit N Portal rebuild capabilities
An integral part of PNPs offerings it says is the provision of ‘back to new’ machine rebuilds. “Delivering the reliability and productivity of brand new equipment, at 60% of the capital cost; that service is comprehensive and backed by warranties & financial options that rival the OEMs.”
As an example, PNP recently completed an eight week rebuild with an April 2021 commissioning of a Caterpillar R1700 LHD for an Australian Goldfields customer. The project included a strip down to bones and a comprehensive overhaul of the transmission, axle/powertrain hydraulics, operators cab, electrics, frame/body, bucket, tyres and rims. In addition to a new RCT guidance system, a Cat® VR Engine (USA Import) and after-market DPF unit was installed, “allowing for reduced emissions and impressive fuel economy.”
