Emeco Holdings extends losses as resource weakness persists

The mining services group has warned of continued weakness in the resources sector, as impairments swelled its net loss.

Emeco earthmoving vehicles.

Troubled mining services group Emeco Holdings has widened its loss through fiscal 2016 and warned investment in the resources sector had yet to show signs of recovery.

The group (EHL) said its net loss stretched out to $225.4 million for the year to June 30, a reading 76.5 per cent below the prior year.

Emeco’s underlying loss improved a modest 4.6 per cent to $90.5m while continued cost-cutting from miners pushed revenues down 14.4 per cent to $206.6m.

The group’s operating earnings before interest, tax, depreciation and amortisation lifted 25 per cent to $54.2m, coming in at the lower end of guidance of $53m-$57m.

Emeco spruiked improvements in its operational performance, but said it was forced to take further impairment charges of $179.6m due to a “slower and softer expected market recovery”.

“The challenging market conditions our business experienced over FY15 continued into FY16,” Emeco managing director Ian Testrow said.

“There was no recovery in rental rates as miners remain focused on minimising their operating cost base, however, we improved our operating margins through a strong focus on reducing and eliminating costs.”

The group continued to seep cash, although net cash outflows improved from $14m to $3m, with Emeco chairman Peter Richards declaring it a “great outcome” given the market conditions.

The mining services provider remains wary on the outlook, tipping M&A activity in the industry to ramp up should a turnaround not be realised in the short-term.

“We remain conservative in our approach to capital management and continue to assess opportunities to deleverage the business,” Mr Testrow said.

“We continue to expect consolidation and rationalisation in the sector if there is no recovery over the near-term. Our improved operating performance positions us well to evaluate opportunities to participate in this consolidation.”