Mincon, the Irish-based engineering tools group, forecasts an upswing in the global mining sector, in the wake of a heightened order book witnessed near the end of its second financial quarter. This came after the sector experienced a sharp drop in activity during the preceding 12 months. The firm, specialising in the production and maintenance of rock-drilling implements for mining entities, announced a 16% decrease in half-year earnings to €16.8 million in comparison to last year’s equivalent period in its financial figures revealed on Tuesday.
Despite the mining sector ecosystem siding with adversity largely due to a hold on numerous construction ventures impacted by surging interest rates, the company remains optimistic. Joe Purcell, the Chief Executive, viewed the surge in activity during the later phase of the second quarter as a silver lining. He expressed his anticipation of a revenue lift as orders start reaching customers.
Operating profits experienced a steep fall of nearly 70%, plummeting to a mere €249,000. Business within the Americas hit a downward trajectory by 29%, while earnings from the Europe and the Middle East region dipped by 17% compared to the corresponding period the prior year. The company attributed this regression to inflated interest rates across both regions, negatively affecting the commencement of various construction works. This mainly implicated privately-funded operations and those not deemed critical.
After Mincon pulled out of a Chilean mining supply contract, the firm reported a 6% reduction in its mining revenues. The termination of the contract in the second quarter was due to inadequate margins for a successful retender that didn’t align with the group’s acceptable contracting standards, causing a 24% downfall in the Americas region’s mining returns. When excluding this contract, there was a marginal 2% decrease in mining income compared to the prior year.
Aiming to enhance operational effectiveness, Mincon, under the stewardship of Mr Purcell, is rigorously assessing its worldwide operations. The review has suggested several cost-cutting measures including shutting down the carbide business in Sheffield later this year. Additional efficiency-boosting strategies comprise robotic integration in Shannon, procurement enhancement to lower the cost of manufacturing inputs, restructuring in South Africa, and refining the innovation management process.
Despite a decline in Mincon’s earnings, Davy Stockbrokers’ analysts note that the recovery of the company’s order book has been ongoing in the second half of the year indicating a substantial improvement compared to the first half, albeit insufficient to compensate for revenue loss until June’s end. Their estimates project an adjustment in full-year profit forecasts, reducing it by approximately a quarter to between €14 million and €15 million.
Akhil Patel, an equity research analyst at Shore Capital, retains a positive medium-term outlook for Mincon. He is confident that with a product line emphasising emission reduction and productivity enhancement, and with links to growth industries such as renewables, infrastructure, and geothermal, Mincon is advantageously positioned to utilise these opportunities.