While managing director Greg Kilmister spent much of last year explaining ALS’s strategy around its non-cyclical markets such as environmental, food, pharmaceutical, tribology and mineral inspection, he told this week’s annual general meeting that it might be time to re-focus energy.
While he described how the steady decline of coal, iron ore and oil prices over the past five years had hit ALS’ financial results, Kilmister said he believed the company’s coal business “did a great job” in the environment it dealt with.
He detailed how its coal business diversified its business mix bringing innovative solutions to mines and further rationalised and optimised its internal operations.
“They remained very focused on the challenges at hand and in that environment increased our market share,” Kilmister said.
ALS’ revenue in the year only fell 5% – not a bad result considering the National Australia Bank noted earlier this month that demand from key seaborne thermal coal markets such as China and India had continued to soften this year while supply remained plentiful.
The bank noted there was considerable excess capacity in the form of idle higher-cost mines globally, and said the weak conditions in key Asian export markets would likely restrict further export growth for Australia in the short-term.
While pricing for ALS’ services dropped considerably during the year, the company still managed to produce an operating margin in excess of 13%, which Kilmister described as a “solid outcome considering conditions”
“Our coal business continues to improve as the cost initiatives of the last few years flow through the operations,” he said.
“Whilst revenue in the first half will decline, operating profit will be flat as margins improve.”
This week ALS also announced an overall guided range of $50-55 million in underlying after-tax profit, down on last year, however, Kilmister emphasised that this had to be placed in the context of each of its operating businesses, because “there are many positive signs for the future”