WDS secures a profit amid the gloom

UNDERGROUND coal contractor WDS has defied the downturn in the coal industry and reported a half-yearly profit.
WDS secures a profit amid the gloom WDS secures a profit amid the gloom WDS secures a profit amid the gloom WDS secures a profit amid the gloom WDS secures a profit amid the gloom

Image courtesy of WDS

Lou Caruana

The results were greeted by the market, with its shares rising 24% to 75c yesterday on the ASX.

Revenue for the mining division dropped 38.5% to $118.67 million while EBITDA plunged 55% to $0.75 million.

WDS managing director Terry Chapman said: “This result illustrates the strength of WDS’ diversified business model, enabling the company to deliver stable results and enhanced returns against a backdrop of considerable volatility in world commodity markets.

“Our mining business, which supplies services to the underground coal mining sector, was severely impacted by the slowdown in the Australian coal industry yet remained profitable, despite the significant falls in activity in the sector.”

While the business took decisive action to cut costs to match the decline in revenue, profitability was impacted by $2.5 million in redundancies and costs associated with the closure of the Mackay workshop.

Numbers employed in the mining division fell 49% to 371 during the year and currently comprise 40% of WDS’ workforce.

“The industry generally has been affected by cutbacks on major capital projects during the year, with a trend away from entering into long-term contracts to a preference for short-term purchase orders,” the company said.

“This has impacted the profile of our order book and an increased focus on working ‘pro-actively’ to increase both delivery performance and cost savings for our clients.”

WDS expects that mining will remain challenging throughout FY2014 and it has taken steps to ensure that the size and cost structure of its business matches activity levels, the company said.

“We remain confident, however, in the longer-term outlook for the sector and have positioned the business to respond quickly to opportunities as and when they arise,” Chapman said.

“We have worked hard to improve our balance sheet, which provides us with the ability to invest in growth opportunities, provides our clients with delivery certainty and has allowed us to enhance returns to shareholders.

“In FY14, we expect to see measured improvement in the performance of our energy business to offset a continuing weakness in mining. As a result, we forecast modest growth in profit for the company in FY14 with continued strong cash generation.”