Ferret's Stock to Watch: BRADKEN LIMITED
08:46, Thursday, 8 February 2007
BIG MAKER AND RESOURCES SUPPLIER SWEPT UP IN THE BOOM
Sydney - Thursday - February 8: (RWE Aust Business News)
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OVERVIEW
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Bradken Ltd (ASX:BKN), is one of Ferret's old favourites after
watching the company build up an attractive new image in the market.
The company is a leading manufacturer and supplier to the
resources and freight rail industries.
It has just posted another record result with sales revenues up
by 9 per cent at $294.4 million, EBITDA up 24 per cent at $47 million and
net profit up 42 per cent at $22.8 million in the half year to December
compared with the same period in 2005.
In addition, shareholders should pr!ck up their ears on the news
that Bradken has upgraded its full-year profit outlook.
In the latest period, earnings per share rose 40 per cent to
21.5c.
Even better news is the interim dividend which has soared 53 per
cent to 14.5c a share, compared with 9.5c in the previous comparable
period.
Another outcome in the period under review has been an
improvement in the lost time injury frequency rate which has fallen to
5.4 from 8.9 previously.
Managing director Brian Hodges said: "These results are due to
continued margin improvement, the strong ongoing demand from the
resources sector and a sound operational performance.
Mr Hodges pointed out that the big jump in dividend was the
result of the board's confidence in the company's future performance.
Each of Bradken's four divisions (Mining, Mineral Processing,
Rail and Industrial) continues to perform well, with Rail and Mining
delivering particularly strong growth.
The Rail division, which achieved results well ahead of the
previous year's first half, recently received a letter of intent for the
supply of coal wagons commencing in the fourth quarter of FY07.
"This will further underpin Bradken's FY07 result and provide a
solid start for FY08," Mr Hodges said.
In the Mineral Processing business, margins improved despite
lower sales.
Mr Hodges said that while the Mineral Processing division
was affected by short-term mine production and consignment stock
consumption issues, the other divisions servicing the resources sector
remained strong.
SHARE PRICE MOVEMENTS
*********************
Shares of Bradken yesterday slipped 3c to $9.37. Rolling high
for the year is $9.40 (also the all-time high) and low $4.06. Dividend is
26c to yield a modest 2.77 per cent. EPS is 38.5c and p/e ratio is 24.34.
The company has 106 million shares on issue with a market cap of $99.3.9
million.
Bradken completed acquisitions of Wundowie Foundry (WA) and
Firth Rixson Castings (UK) in the first half as well as a 19 per cent
equity investment in AmeriCast Technologies (USA) in conjunction with
Castle Harlan Inc (New York).
Subsequent to these, Bradken still retains significant balance
sheet capacity for further aligned acquisitions in profitable domestic
and global markets.
Mr Hodges said: "Wundowie foundry adds substantial capacity and
synergy savings opportunities to our wear plate and block products at a
time when we are expanding into offshore markets.
"Our acquisition of the UK based Firth Rixson Castings, which
manufactures and supplies a range of wear consumables, extends the
company's geography while maintaining the same core technical
capabilities.
"Its integration into Bradken as the new 'Power & Cement'
division provides product extension and is expected to create further
opportunities for sustainable growth and expansion," he said.
"AmeriCast produces the largest castings in North America for
the rail and mining transport industries.
"We are enthusiastic about the long-term prospects and likely
synergies with Bradken as the relationship develops."
He added that capital expenditure for the 2007 financial year
would be about $50 million, a level expected to be maintained throughout
2008 and 2009 as the company implements further upgrades to key
facilities.
"In the last six months, both our foundry production and
fabricated product manufacturing capacities increased due to capex
initiatives and acquisitions, and we are confident that Bradken can
continue to expand its capacity to meet the future growth potential of
its underlying customer base," Mr Hodges said.
"The issue of skilled labour shortages has re-emerged this half
in the areas of machining, moulding and patternmaking.
"We are sourcing and training labour locally wherever possible
and also recruiting from offshore.
"Given the excellent first six months of FY07, the strength of
our underlying markets, the current order book and the expected
contribution from recent acquisitions, Bradken is now anticipating
around 30 per cent growth in EBITDA for the full year, up from the
previous guidance of 20 per cent plus," Mr Hodges concluded.
BACKGROUND
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Bradken Ltd was listed on the Australian Stock Exchange in August
2004.
The company's origins go back to a steel foundry which began
operating in the 1920s.
Today Bradken is is the leading supplier of differentiated
consumable products to the resources and freight rail industries,
employing more than 2,600 people in national and key international
locations.
Bradken's product range includes consumable parts, capital
equipment and associated maintenance and refurbishment services.
The company has excelled in differentiating and customising its
products over many years through its design, metallurgy, steel casting
and fabrication know-how and long-term focus on the resources and
freight rail industries.
It has achieved significant market shares across its key product
groups including freight wagons, bogies, drawgear, ground engaging
tools, mill liners, crawler shoes, industrial cast products and wear
plate and block.
At the forefront of technology and innovation, Bradken designs
its products utilising the latest 3D Solids Modelling coupled with
advanced dynamic and static analysis software and AFS Solidification
Analysis.
It boasts strong alliances with leading international
organisations including American Steel Foundries (ASF) for the supply of
rail components and ESCO for mining components; relationships that have
spanned nearly eight decades.
Bradken services its markets through four strategic divisions,
Mining, Mineral Processing, Rail and Industrial, supported by a network
of fifteen manufacturing facilities across Australia and New Zealand.
The company recognises that safety, the environment and quality
are of critical importance, and has a philosophy that all injuries and
incidents can be prevented.
ENDS
Copyright © 2007 RWE Australian Business News. All rights reserved.
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