Joy profits down but orders up

LOWER sales have reduced Joy Global’s operating profit for the third quarter from one year ago but in a positive sign, orders are up considerably, year on year.
Joy profits down but orders up Joy profits down but orders up Joy profits down but orders up Joy profits down but orders up Joy profits down but orders up

A Joy longwall system.

Noel Dyson

The company is on track for a full-year revenue of between $US3.65 billion to $3.75 billion. It had previously forecast a full year revenue in the $3.6 billion to $3.8 billion range.

Operating profit for the third quarter was $119 million, compared to $274 million for the previous corresponding period.

Excluding restructuring and pension curtailment charges, Joy cited lower sales volumes and lower manufacturing cost absorption for the profit fall. Joy added that those factors were partially offset by cost savings from the company’s restructuring programs and lower incentive-based compensation expense.

Restructuring optimise the company’s manufacturing footprint and better align its costs with anticipated demand continued in the quarter.

The company also completed negotiations with some of its US bargaining units to freeze their respective defined benefit plans at the end of the calendar year.

These actions resulted in a $7.8 million non-cash pension curtailment charge in the third quarter and completed the company’s shift from defined benefit plans to defined contribution programs in the US.

While sales were down, consolidated bookings in the third quarter totalled $923 million, up 33% on the previous corresponding period.

Original equipment orders grew 195% year-on-year and service orders grew 7% compared to the same time last year.

This quarter the value of the bookings was down $13 million but that was due to the impact of foreign currency movements.

Bookings for underground mining machinery grew 37% in comparison to the third quarter last year.

Original equipment orders increased 130% compared to the previous year. Original equipment orders increased in North America, Australia and Africa with declines in all other regions.

Service orders increased 11% compared to the prior year with increases in all regions except Australia and were led by stronger rebuild activity in all regions.

Surface mining equipment bookings grew 36% compared to the third quarter last year.

Original equipment orders were up 551% compared to the previous corresponding period.

Surface mining original equipment orders increased in South America, Australia and China but were partially offset by declines in all other regions.

Service orders for the surface kit grew 3% compared to the previous year. Increases in North America, South America and Australia were offset in part by reductions in all other regions.

Consolidated net sales were $876 million, down 34% on the previous year’s third quarter.

Original equipment sales fell 57% and service sales were down 14%.

Joy president and CEO Ted Doheny said the company continued to execute well in “a challenging commodity market environment.

“We continue to see stability in our core service business and have achieved another quarter of solid cash generation, which enabled further progress on our share repurchase program,” he said.

“Additionally we are encouraged about the recent acquisition of Mining Technologies International and product development projects that position the company for long-term growth in underground hard rock mining.”

Doheny seems pretty positive of the way ahead for the original equipment maker.

He said service bookings tied to Joy’s global shovel fleet were driven by strength in global copper markets.

“Additionally, we saw some improvements in our service business related to the US coal market rebuilds and the as the ability of some of our customers to continue to delay maintenance appears to be reaching an end,” Doheny said.

“Another area where we see opportunities is in the iron ore market. Although prices have declined nearly 30% since the beginning of the year, the steep global cost curve continues to provide service opportunities for our installed base with lower-cost producers.

“Iron ore demand, driven by strength in global steel markets, resulted in the booking of two shovels in China during the quarter.

“Quote log activity with other major iron ore producers remains active and we expect additional sales to materialise in coming quarters.

“We continue to see some progress in our efforts to develop the domestic Chinese coal market with our full range of products and systems approach.

“Market conditions that have resulted in coal prices declining more than 25% and domestic production trailing last year by more than 2% have driven an increasing need for mechanisation of mines and new technologies and products.

“These challenging market conditions have provided an opportunity to work with our customers to customise solutions that shift their cost curves lower and return them to profitability.

“We will continue to invest in our technology and leverage our China footprint as the expected consolidation brought on by market conditions continues to play out.

“We remain optimistic about the long-term growth prospects in coal and other mined minerals in eastern Europe and Russia.

“We continue to invest in the construction of our new service centre in Russia, with the opening planned later this year.”

That Russian facility in the Novokuznetsk region is for the repair and rebuild of both surface and underground equipment.

“During the quarter rolling 12 month bookings increased sequentially for the first time since the first quarter of 2012,” Doheny said.

“Strengthening economic growth should drive demand but this will be tempered with supply rationalisation in certain markets and result in a slower growth profile.”