Ferret's Stock to Watch: AUSTIN ENGINEERING LIMITED 08:20, Friday, 4 March 2005
AN ENGINEERING COMPANY WITH A LOT OF POTENTIAL TO EXPLOIT
Sydney - Friday - March 4: (RWE Australian Business News) *********************************************************
OVERVIEW ********
Austin Engineering Limited is predicting a dramatic improvement in net profit for the full financial year.
Directors earlier this week announced the finalisation of previously forecast contracts which reinforces the EBIT profit guidance for the current 12 months to June 30.
They expect earnings to be in excess of $2 million as advised by the company early last month.
Over the last month Austin has secured new contracts totalling over $8.5 million for the company's Queensland and Western Australia operations.
Combined with existing contracts, these orders reinforce Austin's ability to deliver on the profit guidance.
The recent contracts support the mining and resource sector and in Queensland include major steel and fabrication work for projects in Blackwater and Papua New Guinea as well as the fabrication of screens, dump truck bodies and dragline components.
Western Australia contracts include dump truck bodies as well as service and fuel vehicles.
The contracts have been received from clients including the Barclay Mowlem/Roberts and Schaefer Joint Venture, Clough Projects Australia and major OEM suppliers of mining equipment.
Austin Engineering's chairman, Mr Peter Fitch, said the confirmation of these contracts means that current operations in both states will be running at near full capacity and with additional further contracts expected over the coming months, the company is anticipating a very strong second half for the current financial year.
"A very positive development of the company's Queensland operations has been our success in securing additional contracts for the John's Engineering proprietary range of products," he said.
The company expects to receive further contracts, valued at about $1 million, for these products in the next month and its plans for further development and expansion into this market have opened up the potential for further growth for the Queensland operation.
"In addition, Austin Engineering is currently introducing new automated technology to streamline existing fabrication methods and processes in our Western Australia operation," Mr Fitch said.
"We expect this will provide for a significant increase in productive capacity from April 2005 onwards."
SHARE PRICE MOVEMENTS *********************
Shares of Austin yesterday traded steady at 36c. Rolling high for the year has been 52c and low 22.5c.
The company last month reported a 7 per cent fall in net profit to $286,019 for the December half on revenue which soared 103 per cent to $15.1 million.
Directors pointed out it was difficult to compared the latest half with the same period of the previous year because the company was still in private hands and a de-merger had still to be carried out.
They said the comparative financial data for the half-year ended December 31 2003, on which the volume and percentage movements detailed above are based, represents the activities of the company in the period prior to listing on the ASX in March 2004.
Accordingly, a comparison of the company's operations, financial structure and financial performance between the current and previous corresponding half-year periods must recognise the differing nature and extent of the company's operations and financial structure in each of these periods.
In particular, the company's corporate structure in the 2003 half hear substantially reflects operations as a proprietary limited company, as a subsidiary of West Australian Metals Ltd, and the cost structure and expenses incurred in this period do not include any statutory, compliance or operating costs associated with the company's status as an ASX-listed entity.
Revenue for the six months to December 2004, and the increase over the previous corresponding period, reflects the contribution from the business of John's Engineering, which was acquired on September 1.
Profit after tax for the half-year ended December 2004 reflects the appropriate provision for income tax on profits arising in the period.
Profit after tax for the corresponding previous period reflected a nil tax charge, due to (at that time) the uncertain extent of tax losses available to be utilised following the de-merger from West Australian Metals Ltd.
The tax charge for the full year ended June 30 2004, as reported in the company's annual report, was $243,289, of which a portion could be attributed to the profit arising in the period to December 2003.
BACKGROUND **********
Austin Engineering Ltd operates in the engineering industry with manufacturing facilities in Brisbane and Perth.
The Brisbane facility provides fabrication facilities servicing the mining, oil, gas and industrial sectors.
Key product lines include structural steel, piping, mineral processing equipment, potshells and superstructures.
The Perth facility (John's Engineering) designs and manufactures products used in the resources industry including dump truck bodies, excavator buckets, materials handling equipment and large service vehicles.
Austin own rights to innovative welding processes which are being introduced to improve welding productivity, coupled with robotic applications to suit product lines, general fabrications and any repetitive production processes.
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