Laboratory testing giant says it will add capacity to cope with surging mining demand

Shares in laboratory testing giant ALS jumped on Wednesday after the company said key mining markets were recovering strongly from the hit of the pandemic.

ALS chief executive Raj Naran. Picture: Annette Dew

Shares in laboratory testing giant ALS jumped on Wednesday after the company said key mining markets were recovering strongly from the hit of the pandemic, with the company looking to add capacity to its testing capabilities to cope with surging demand.

After accepting about $3m in JobKeeper grants from the federal government as the pandemic took hold – along with $20.5m in wage subsidies in Canada – the company said the strong second half performance meant it would repay Covid-19 related subsidies “in all countries where repayment mechanisms exist”.

Underlying net profit at ALS still slipped 1.5 per cent for the year ending March 31, to $185.9m, after the company’s first half was hit badly by the pandemic.

ALS shares closed up $1.40, or 12.9 per cent, to $12.30 on Wednesday.

Revenue fell 5.2 per cent across the year, to $1.76bn, with earnings before interest and tax up 17.8 per cent to $288.5m. Net profit lifted 35.1 per cent to $172.6m against a statutory result in the previous financial year that was hit by one-off costs associated with the disposal of its Chinese testing businesses.

But ALS said revenue from its commodities division jumped 7.5 per cent in the second half of the year as activity jumped across the sector as global commodity prices surged.

Its commodities division booked a 2.7 per cent revenue decline compared to the previous financial year, to $624.8m, but ALS said testing volumes through its laboratories lifted 19 per cent in the second half of the year, with the company looking to add additional capacity to cope with demand – although it warned analysts capacity growth may be limited by its ability to recruit staff and secure additional laboratory equipment in an increasingly competitive market.

Earnings before interest and tax in the division lifted 4.8 per cent to $172.5m.

“Geochemistry sample volumes were up 2 per cent for the year following a strong recovery in the second half (19 per cent compared to previous corresponding period). Major miners (76 per cent of volume) primarily drove the volume growth with an increasing contribution from junior miners,” ALS said.

“The first half of financial year 2021 was the most impacted by the COVID-19 pandemic due to the economic shutdowns it caused. The sustained increase in global economic activity during the second half resulted in a significant improvement in performance across the group, although the risk of new economic shutdowns remains as the pandemic continues.”

The Brisbane-headquartered laboratory giant employs more than 15,000 people and operates in 65 countries, testing more than 40 million samples a year.

ALS said its life sciences division also saw growth in the second half of the year, with underlying EBIT up 1.3 per cent to $150.6m, despite a 3.2 per cent fall in revenue, to $930m.

But its industrial division, which provides inspection services for infrastructure, was still lagging under the weight of the pandemic, with underlying EBIT down 18.7 per cent to $20.5m as its clients delayed new projects and reduced the scope of work in other areas.