Mincon, an Irish engineering tools group, said it expects to see more evidence of a recovery in the global mining industry after a pickup in its order book towards the end of its second financial quarter following a plunge in activity over the past 12 months.
Revenues at the group, which makes and services rock-drilling tools for mining companies, sank 16 per cent to €16.8 million in the first six months of 2024 compared with the same period last year, Mincon revealed in half-year financial results on Tuesday.
The Dublin-headquartered business said the mining environment remained challenging over the period with many construction projects delayed due to the effect of rising interest rates on costs and viability.
However, chief executive Joe Purcell said the group was encouraged by a pickup in activity levels towards the end of the second quarter. “We expect a recovery in revenue as the increased order book begins to be delivered to customers,” he said.
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Operating profits at Mincon sank by almost 70 per cent to just €249,000 as the group’s business in the Americas plunged 29 per cent, while construction revenues in its Europe and Middle East region declined by 17 per cent compared with the same period last year.
“Across both the Americas and Europe and Middle East regions interest rates have been the driving factor in the slowdown,” Mincon said. “Interest rates increased further during [the first half of 2023], and this has had a direct impact on the starting date of a number of construction projects. These are mainly in private sector projects and others that are deemed non-critical.”
Mining revenues sank 6 per cent after the group exited a mining supply contract in Chile. Mincon said the contract ended in the second quarter because the “margins required to win a retender were ultimately not at a level which the group would be willing to contract”. This contributed to a 24 per cent drop in mining revenues in its Americas region, the company said. When that contract is excluded, mining revenues were down just 2 per cent compared to last year.
Mr Purcell said Mincon continues to focus on “driving operational efficiencies” amid a “root and branch review” of its global operations. “This review has led to cost-cutting initiatives, which includes the decision to close our carbide business in Sheffield later this year. Other initiatives to drive operational efficiencies include the introduction of robotics in Shannon, improved procurement to reduce manufacturing input costs, restructuring in South Africa and refining our innovation management process.”
In a broker note analysts from Davy Stockbrokers said Mincon’s results are “behind expectation” and it expects to cut its forecasts for full-year earnings by around a quarter to between €14 million and €15 million. However, analysts said the recovery in Mincon’s order book has continued into the second half of the year, which should “show some significant improvement” relative to the first half but not enough to recover the revenues lost in the six months to the end of June.
Meanwhile, Akhil Patel, equity research analyst at Shore Capital, said the medium-term outlook for Mincon remained encouraging. “We continue to believe Mincon, with its product range focused on reducing emissions and increasing productivity, with exposure to growth sectors (ie metals for renewables, infrastructure and geothermal), is well placed to take advantage.”
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