Thomas & Coffey sees its future in coal

TROUBLED industrial services company Thomas & Coffey will focus on servicing the coal industry in Queensland’s Bowen Basin and the New South Wales Hunter Valley after reporting an after-tax loss of $3.6 million for the six months to December 2011.

Lauren Barrett

Managing director Rex Comb said it would turn to its key market sectors, including coal and utilities, after a company restructure and a slump in the steel and aluminium sectors.

“Management’s key priorities are to continue to strengthen the company’s earnings and lower its risk profile by leveraging growth opportunities, particularly in the Hunter Valley and Bowen Basin regions, and to improve cost efficiency,” he said.

The company recorded an after-tax profit from continuing operations of $1 million, down from $2 million in the first half of 2010.

While maintenance services revenue increased by 8% over the previous corresponding period and revenue and earnings increased from the mining sector, Thomas & Coffey saw a slump in revenue from the industrial sector.

Comb said a drop in its profits was mainly due to company restructuring.

“As foreshadowed at the annual general meeting in November, this result reflects changes to refocus the business on maintenance, engineering and project management services for the mining and industrial sectors and to restore profitable growth,” he said.

In November last year the company announced the withdrawal from major commercial construction in Sydney, Newcastle, Brisbane, Perth and Darwin and the closure of the company’s prefabrication operation.

Due to the recent company restructure, net assets at December 31, 2011 were $20.1 million, down from $20.3 million six months prior.

Comb said its results were also a reflection of Australia’s “multi-speed” economy with “continued growth in demand for services in the mining sector and contraction in industrial sectors, particularly steel and aluminium, and losses on some commercial projects.”

Meanwhile revenue from engineering and construction services was marginally above the previous corresponding period on the back of the start-up of mining infrastructure area projects.

The company saw lower revenue and margins from the industrial sector, resulting in a significant reduction in engineering and construction services contribution.

Looking ahead, Comb was optimistic, forecasting a profit for the second half of the year.

“The restructure we have undertaken during the past year has reduced the company’s risk profile and established a more focused organisation that is better placed to serve our customers in the mining and industrial sectors and improve shareholder returns,” he said.

He said while earnings from the mining sector remained robust, the steel and aluminium industrial markets were weakening.