Falling resource activity and turmoil in coal markets have forced Australia’s biggest crane services provider into loss making territory, and the company says conditions will not improve until an anticipated upturn in infrastructure investment in around twelve months’ time.
Unveiling its full year results on Wednesday, Melbourne based Boom Logistics said asset write-downs and restructuring costs of almost $90 million had caused the company to record a net loss after tax of $79.5 million and a negative earnings before interest and tax expense (EBIT) of $74.7 million.
Included in the write-downs was the entire value of the company’s goodwill ($70.8 million) as well as $8.3 million in restructuring costs, an impairment charge relating to assets held for sale of $4.5 million and an impairment charge for fixed assets of $4.8 million.
Even stripping out one-off items, however, the company’s net trading profit after tax (underlying profit after tax) dropped from $10.7 million to $3.9 million.
As the resources boom fades, Boom – which derives around two thirds of its revenue from clients associated with this sector - is facing severe headwinds as mining projects come offline at the same time as price competition is intensifying as increasing numbers of cranes hit the market.
The company has been particularly affected by the current malaise in coal markets, whereby its maintenance division has suffered as coal suppliers in Queensland’s Bowen Basin and the Hunter Valley in New South Wales slash output volumes amid significant worldwide oversupply and falling prices.
Such challenges have seen the company slash 233 jobs over the past two years (with provision for a further 44 redundancies) and desperately try to renegotiate what it says were previously uncompetitive enterprise bargaining agreements.
Boom Managing Director Brendan Mitchell said the latest results reflected difficult market conditions but added the company was focused on restructuring initiatives and winning new work, including having recently bagged new supply agreements with Fortescue Metals, Aurizon Operations Limited and Vestas Wind Farm Maintenance Services.
“It is difficult to say that the market has bottomed, but we believe our business has come through the worst of it,” Mitchell said.
“We’re still seeing the same continuing pressures and issues in the coal sectors in New South Wales and in mining in Western Australia. Wherever there is mining there are challenges in terms of pricing pressures and competition. A number of projects are coming off line and there are more cranes coming into the market and competing for our type of work.”
“Offsetting this, we have specific contracts giving us work that is known and planned, and newer contracts coming on line in infrastructure. We’re seeing opportunities, for example in wind farm and high voltage transmission work, and we’ve signed new clients such as Aurizon.
“In most of these cases, factors other than just pricing count. So from this perspective, we believe our business has bottomed.”
Going forward, Boom expects market conditions to remain challenging until planned infrastructure projects begin to appear in around twelve months’ time, but says it expects company performance particularly in Queensland and Western Australia to improve thanks largely to operational benefits associated with restructuring efforts.
According to the most recent IC 50 ranking in KHL’s International Cranes magazine, Boom is the largest crane hire company in Australia and the 34th largest such company in the world.