Chinese underground coal powers Industrea

CHINA’s push to lift underground coal mine productivity has helped mining services product group Industrea to report a record adjusted net profit of $A49.1 million for the 2010 financial year.
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Industrea's stand at the China Coal & Mining Expo 2009.

Lou Caruana

Export sales from Industrea’s Diesel Equipment and Technology divisions almost doubled to $136.0 million, coupled with the continued diversification of the Huddy’s Mining Services business which added significant new long-term contracts in the Hunter Valley and Bowen Basin regions.

Operating revenue increased 21% over the prior year to $313.2 million while earnings before interest, taxes, depreciation and amortisation increased 11% to $112 million compared with last year’s $100.6 million. Adjusted net profit was 8% higher year-on-year.

Industrea managing director and chief executive Robin Levison said the company’s strategy of moving into new markets in mining products and services, underpinned by continued investment in China, the world’s biggest and most resilient resources market, delivered another highly successful year for all group businesses.

“China’s expansionary coal sector, which is growing at around 9 per cent or 300 million tonnes per annum, and the government’s mandate to significantly lift underground mine productivity and safety drove another outstanding performance by our Diesel Equipment and Technology businesses,” he said.

“Our position as a supplier of choice to an increasingly diverse group of China’s leading coal producers for specialist longwall roof support carriers, methane gas drainage and collision avoidance systems generated on average around $10 million per month in new contract wins throughout the year, via Beijing based subsidiary, Wadam Industries.”

He said the Diesel Equipment division had successfully leveraged off the prior year’s investment in boosting manufacturing capacity, and reach of the company’s China subsidiary, Wadam Industries, to boost revenue 97% above the prior year to $113.0 million.

“Both divisions are well positioned to increase sales into China, with demand for coal mining equipment in China forecast to increase by 30 per cent in 2010, 40 per cent in 2011 and 20 per cent in 2012, based on the aggressive mechanisation and mine consolidation programs continuing throughout the country’s deep and gassy coal mines,” he said.

Levison said the Chinese government-led consolidation of underground coal mines was creating a larger pool of customers demanding Industrea’s state-of-the-art longwall diesel equipment and methane gas drainage equipment.

“We are strengthening our competitive position in the Chinese marketplace through establishing a diesel equipment manufacturing facility in Hebei province, to supplement our existing marketing, distribution and servicing arm,” he said.

“Plans are on track to commence the manufacture of a flameproof and explosion-proof personnel and materials vehicle designed exclusively for China’s underground coal mining market by mid-2011.”

Levison said a highlight of Industrea’s export performance in financial year 2010, was not only the increased number of recurring export sales to existing customers, but the substantial lift in revenue from after-market sales sources, including equipment spare parts and servicing.

“Our spare parts and service revenue in FY10 was up 45 per cent on the prior year to $48 million. The company signed its largest single after sales order to date of $7.8 million for drill guidance system spare parts in July 2010,” he said.

“By the close of FY10 Industrea had over 3500 collision avoidance units, 115 methane gas drainage and direction drilling systems, and over 600 diesel mining vehicles in operation in various global locations.

“The continued growth of our new business pipeline will trigger increasingly higher levels of recurring revenue from this source over coming years.”

Levison said the continued diversification of Huddy’s Mining Services into new markets and a corresponding improvement in equipment utilisation rates in FY10 delivered strong monthly cash flows and yields that progressively improved through the year.

He said Huddy’s had successfully secured new long-term contracts in FY10, including those with Cockatoo Coal’s Baralaba Coal Mine near Moura in Queensland, Rio Tinto’s Mount Thorley Warkworth Mine in the Hunter Valley and Xstrata subsidiary, Ernest Henry Mining for its Tailings Storage Facility Earthworks in Mt Isa.

“Based on expansion plans announced by the owners of Baralaba Coal Mine, Mt Thorley Warkworth and Handlebar Hill, along with a new contract with CST for its Lady Annie Mine, we are confident of achieving steady growth for the Huddy’s mining services business,” he said.

Levison said while China remained a critical part of the company’s forward growth strategy, Industrea was also pursuing additional export opportunities in other rapidly emerging markets including India, Indonesia and Russia.

Industrea’s shareprice was 0.5c higher 34.5c in morning trade.