Sedgman posts profit

BUCKING the trend somewhat, the company that made its name as a coal handling and preparation plant specialist has posted a net profit after tax for the half-year of $A4.7 million.
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Image courtesy of Sedgman.

Noel Dyson

Sedgman’s result was boosted by higher combined sales revenue and improved margins in its Projects business.

Those benefits were partly offset by weaker revenues and margins in its Operations business.

The company cut its overheads and support costs by 32% from the corresponding period. A continued focus on cost control across the business is being maintained.

The company’s order book has grown to $596 million of contracted work in the Projects and Operations businesses as at December 31, compared with $385 million at June 30.

Combined sales revenue for the Projects business grew 24.5% to $104.7 million as engineering, procurement and construction projects at Boggabri, Aurora and Solomon progressed. In the prior corresponding period Mungari was the only major EPC project under construction.

The Projects’ underlying earnings before interest, tax and amortisation for HY2015 was $3.2 million.

The EBITA margin of 3% for the half-year was more than the -17.7% margin achieved in the same period last year.

Project margins increased due to making better use of project staff, lowering business costs and the recovery of previously impaired debtors.

Sedgman managing director Peter Watson said the company had performed well despite the challenging market.

“We have delivered cost reductions through a business restructure, refocused the organisation on our core global minerals strategy, strengthened our low-cost sourcing capability in China, refreshed our vision and successfully differentiated ourselves in a very competitive market,” he said.

Sedgman continued to win EPC projects across a range of commodities:

  • a $133 million EPC contract for GEMCO at its manganese mine in the Northern Territory;
  • a $59.8 million contract for the filtration plant at Alcoa’s Kwinana alumina refinery in Western Australia;
  • a $36.7 million contract for the turn-key delivery of the train load-out for Cockatoo Coal’s Baralaba mine in Queensland; and
  • the Thiess Sedgman Projects joint venture won a $64 million EPC contract for a modular iron ore processing plant at Fortescue Metals Group’s Solomon mine in WA.

However, that last project is being reviewed by FMG.

Combined sales revenue for the Operations business fell $20.3% to $55.6 million.

This was due to three operating sites Sedgman had managed in HY2014 on behalf of clients either closing down or being taken back over by their owners.

EBITA margin for Operations of 8.4% was within expectations as the business was still focusing on cost control.

Watson said with subdued market conditions continuing, opportunities were typically smaller scale with heightened expectation on delivery assurance and facility performance.

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