the west

11th February 2009, 8:45 WST
http://www.thewest.com.au/default.aspx?MenuID=3&ContentID=124124

Shares in earthmoving equipment company Emeco soared today after the company predicted a record first half profit.

Emeco shares closed 10.5 cents, or 50 per cent, higher at 31.5 cents after the company forecast first half profit of $39.1 million – a 27.9 per cent rise on the previous corresponding period.

Investors shrugged off a downward revision of the company’s full year earnings guidance which it forecast at $67.5 million, down from guidance of between $75-$81 million.

Emeco said with full year net profit after tax was expected to be in the range of $65-$72 million.

The earnings downgrade was prompted by global slowdown in the construction and mining industries, the company said

Emeco also warned of the uncertainty of any forecasts made in the current economic environment.

“Since November 2008, the global economy and financial markets have continued to weaken resulting in a rapid deterioration in the global mining and construction industries,” the company said.

“In particular, Emeco is experiencing an emerging decline in demand from customers exposed to base metals and coking coal and from customers forced to close mines due to commodity price pressure rendering them sub economic.”

However the company said the loss of business had been partially offset by customers in the thermal coal, gold and iron ore sectors and those moving to a rental model to preserve capital and maintain flexibility.

Emeco chief executive Laurie Freedman said the revised guidance was on the back of extraordinary market conditions but the company’s business model remained sound.

The company said it remained well capitalised and was comfortably compliant with all its debt covenants.

“We believe the quality of Emeco’s fleet and its global diversification position the business very well capitalise upon the return of normal market conditions, the expected boost from infrastructure spending projects and a continuation of the capital preservation theme throughout the resource industry,” Mr Freedman said.