Mastermyne production expertise to ramp up profits

A FOCUS on underground coal production instead of construction will position contractor Mastermyne for stronger growth next year, despite reporting a 71.5% lower annual net profit because of the mining downturn in the sector over the last 12 months, managing director Tony Caruso says.
Mastermyne production expertise to ramp up profits Mastermyne production expertise to ramp up profits Mastermyne production expertise to ramp up profits Mastermyne production expertise to ramp up profits Mastermyne production expertise to ramp up profits

Training a crew at Mastermyne's Myne Start underground coal mine complex in Mackay Queensland.

Lou Caruana

The net profit result of $2.99 million for the full year FY2014 was struck off revenues of $171.9 million, which were also down by 31% from prior corresponding period.

“Delivering this result during a period when the Australian mining sector has had to aggressively reverse its cost structure is a strong endorsement of the how well the company is positioned with its major customers and with the underground coal sector generally,” Caruso said.

“Our ongoing leverage to production versus construction and maintenance has seen the company deliver a result that will position the company well for the year ahead.”

The next financial year will see a continued focus on cost reduction by customers however Mastermyne is well positioned with a strong order book totalling $257 million, (of which $112 million is expected to be delivered in FY2015), traditional uncontracted recurring work of about $26.5 million and about $25 million of contract renewals contributing to FY2015, according to Caruso.

Mastermyne has experienced an increase in roadway development tenders as driveage which had previously been deferred has reached a point where it cannot be deferred any further without impacting longwall continuity for some operations.

The company is working on a number of roadway development tenders worth more than $470 million and the tendering pipeline is above $1 billion with $564 million in active tenders.

The significance of the roadway development tenders is the requirement of the contractor to supply its own fleet which, if successful, will see the company’s utilisation rates increase and drive margins up.

Also benefiting equipment use will be dry hire opportunities as the company sees the regulatory requirement for maintenance and compliance requiring replacement equipment to minimise production disruption while these activities take place.

The shor-term outlook appears to remain unchanged for commodity prices which will continue to see operators using the services of contractors to keep cost and workforce structures flexible, substitute permanent employment and to continue to drive cost efficiencies.

Mastermyne remains well positioned with its strong link to first tier mining companies who operate high volume metallurgical coal mines, according to Caruso.

“The longer term outlook for coal is gaining momentum however the immediate focus will remain on operating cost effective mines,” he said.

“The company has also experienced more enquiries for contract operator projects and is currently exploring some opportunities in this area.

“The company continues to be profitable with a strong balance sheet, has good visibility on earnings and the future is well supported by a robust tendering.”