Sedgman not so 'recession-proof'

A LACK of demand for Sedgman’s businesses has prompted the company to retract its prediction that it will deliver cash earnings per share growth of 15-20% in the 2009 financial year.
Sedgman not so 'recession-proof' Sedgman not so 'recession-proof' Sedgman not so 'recession-proof' Sedgman not so 'recession-proof' Sedgman not so 'recession-proof'

Courtesy of Sedgman.

Claire Svircas

Chief executive Mark Read told the company’s annual general meeting in late November that Sedgman’s core business in the delivery of coking and thermal coal offered a “recession-proof” element to the Sedgman business structure.

The coal backing has led to the expectation the 2009 financial year would deliver cash earnings per share growth of 15-20%, in line with previous guidance.

Today Read said earnings per share, excluding amortisation and the write-down of intangible assets, are now expected to broadly be in line with the previous corresponding full year result of 16.1c per share and a first half result of 7.9c per share.

While the coal sector continues to buoy the company with strong ongoing revenue streams, the Intermet Engineering division – part of the Sedgman Metals group – is suffering from weakened metal prices.

“This anticipated result includes a $3.7 million provision for doubtful debts relating to several clients associated with the Intermet business,” the company said in a statement.

“These clients have been significantly impacted by the lack of available credit in the market place and, accordingly, Sedgman has adopted a prudent accounting treatment and provided for the full amounts owed.

“However, recovery of these debts will continue to be vigorously pursued.”

Sedgman also intends to book a $20 million non-cash write-down against the goodwill value associated with Intermet in the first half of the year due to the impact of the global fall in metal prices.

Sedgman said it believes the current subdued trading conditions will remain in the metals sector for 12-18 months, so it has introduced cost cutting initiatives to the Intermet business.

“Our recent announcements on securing the $25 million Bengalla coal handling and processing plant upgrade (CHPP) contract and the $13.6 million New Acland mine CHPP upgrade is evidence that Sedgman continues to win new work,” Read said.

The company has also recently received a letter of intent to proceed with the $55 million design and construction of a coal handling facility upgrade in Chile.

The news yesterday saw Sedgman shares slide 1.28% or 5c to 38.5c.