MARKETS

Joy sings in the tune of $US6.5 million

RECOVERY in aftermarket business in Australia and South Africa, slow demand in the US market and increases in quoting activity in China summed up Joy Global’s US$6.5 million third quarter.

Angie Tomlinson
Joy sings in the tune of $US6.5 million

Aftermarket sales was the catalyst for Joy Global’s net income of US$6.5 million for the third quarter verses a prior-year loss of US$1.3 million. Joy Global’s Mining Machinery arm recorded slower sales of US$166 million, mainly attributable to sluggish demand is US related markets.

The OEM recorded an aftermarket revenue increase of 10% over the previous quarter and 21% over a year ago.

Joy attributed the increase to aftermarket revenues with improvements in many geographical markets, even though revenues were up only slightly in the underground mining segment in the US.

Gross margin improvements were credited to an improved mix of original equipment revenues, cost improvement activities and aftermarket revenues.

Net sales for the quarter totalled US$300 million, compared to US$302 million in the third quarter of last year.

“Given the continued weak copper and coal markets, we are pleased to see the favourable impact an increase in our aftermarket business had on overall performance. Although we have yet to see a significant increase in capital spending in these markets, we are beginning to see some positive trends,” said CEO John Hanson.

No longwall roof support sales in the third quarter impacted negatively on net sales for Joy Global’s Mining Machinery arm, which recorded sales of US$166 million, down from US$193 million in 2002 third quarter.

“The third quarter saw some recovery in Joy’s aftermarket parts and services business, particularly in South Africa and Australia. However, U.S. coal related markets continue to negatively impact our operating results,” said Hanson.

“Coal production in the U.S. is no longer declining compared to last year, though underground production still is not showing definitive signs of a recovery.

“U.S. coal production, while slowly recovering from the low levels of the past several quarters, remains constrained as coal producers maintain their production discipline and demand has reflected the somewhat cool summer weather conditions in many parts of the country.

“Many international coal markets remain challenged by the adverse impact of currency exchange rates and weak global economic growth.”

Hanson said the bright spot remained in China, which is reported to have increased production by almost 20% in the first half of the year.

“Quoting activity in China for our types of coal mining equipment has increased recently, and we remain optimistic that this market represents a significant opportunity for us,” he said.

“Our service centre in Baotou, China is scheduled for completion in September and will greatly enhance our ability to service our customers in that market.

Hanson said a foundation of improved aftermarket business and stronger demand for conventional equipment, such as continuous miners, in the US would provide a basis for improved performance over the next 12 months.

“We expect revenues will be in the range of US$1.15-1.30 billion.”

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