Mining and engineering services group Bradken is sticking to its full-year earnings guidance a day after its board accepted a $556 million takeover bid from Japan's Hitachi Construction Machinery.
Chief executive Paul Zuckerman told Bradken shareholders on Wednesday he expects full-year underlying earnings to be in line with the previous year’s $108 million as the company looks to trim debt and focus on cost control.
“Given the results that we achieved so far this year, and assuming a continuation of current market conditions, we retain our guidance for fiscal 2017,” he said at the company’s annual general meeting.
For the three months ended September 30, sales revenue slipped to $186 million, from $193 million in the same period a year ago.
Gross margin was slightly ahead of last year, at 34.5 per cent, while the order book remained consistent, with total backlog of $358 million. The company plans to reduce net debt by a further $50 million to $60 million this financial year, he said.
Bradken, like other mining services companies, has struggled amid the prolonged mining downturn over the last two years. The company booked a net loss of $196 million in FY16.
In the last financial year, it slashed its workforce, closed some manufacturing facilities, acquired a low-cost manufacturing unit in India, and exited loss-making UK operations in an effort to tide over the falling demand for its services.
Bradken fended off numerous corporate suitors last year while battling an uncertain market outlook, but earlier this month received a $3.25 a share takeover offer from Hitachi.
Bradken’s directors unanimously recommended the bid on Tuesday, after independent advisors Grant Thornton concluded the offer was fair and reasonable.
“Your board considers that this offer delivers a good result for shareholders when measured against the recent trading history of our shares,” chairman Phil Arnell told shareholders at the company’s annual general meeting.
Hitachi’s bid represents a 34 per cent premium to Bradken’s closing price on October 3, the day before the offer was made. Bradken shares have more than trebled in value over the last six months, but are still worth less than half of their value in 2012.