MASTER Drilling declared a 26 South African cents per share gross dividend for its 2017 financial year which, despite recording lower earnings year-on-year, reflected the group’s optimism amid improving trading conditions in the world’s mining sector.
“The uptick in the global economy and commodity cycle is expected to have a positive impact on our business going forward,” said Danie Pretorius, CEO of Master Drilling. “Our pipeline is strong and we are excited about our entry into India and Australia, further diversifying our geographical exposure,” he added.
On March 12, the company announced it would buy the balance of Bergteamet Raiseboring Europe for R100m, a business in which it already had a beachhead. Buying out the rest of the company’s shares was a key part of its diversification market and would provide further in-roads into the European drilling market.
Higher borrowing costs and the improvement in developing market currencies against the dollar hurt earnings for the year, however. Share earnings in rand terms fell 27.1% to 153.1 cents/share year-on-year but earnings were also down in dollar terms, some 19.6% lower at 11.5 US cents/share.
Debt also increased to $44m at the year-end from $31m as of December 31, 2016, but on a net basis gearing fell to a mere 2.4% from 6.4% previously. This was a function of Master Drilling’s focus on improving its net cash generation which increased to $32.8m – not the target the company had been working towards but it was “… moving in the right direction”.
The geographies in which Master Drilling operates showed mixed business fortunes during the period under review. Business in central and North America was reported to be good whilst there were “green shoots” in terms of South America. Conditions in Scandanavia, a region to which it is exposed by dint of the Bergteamet Raiseboring Europe deal, was “… disappointing” with the unit achieving a break-even position only.
However, the company was cautiously optimistic about the road ahead in South Africa following the appointment of Cyril Ramaphosa as president and Gwede Mantashe as the country’s new mines minister, replacing Mosebenzi Zwane. Mali and Zambia were performing in line with expectations, it said.
The improvement in commodity prices had had a positive effect on the company’s order book with contained committed orders of $124.7m and a pipeline of $228.1m. “Although not immediate reflected in our numbers, we do expect a positive impact on our revenue during the next reporting period,” the company said.
Said Pretorius: “Our continued focus on working capital management has borne fruit. New geographies, clients and technologies require large initial outlays and Master Drilling’s robust support approach enables optimal operations and maintenance support that is essential to building trust with clients”.
Master Drilling says revenue up 2.8 percent in 2017
Raise boring and drilling company Master Drilling said on Tuesday its revenue increased 2.8 percent to US$121.4 million while operating profit decreased marginally to $24.8 million in 2017.
The company said this was a positive result given that one of the group’s machine categories, the XX-large machines category, was utilized only 40 percent during the year. Cost of sales increased in line with the increase in revenue, bringing about a flat gross profit percentage in dollar terms.
“Despite 2017 having been a challenging year with various political changes across the world and a tough local macroeconomic environment, we delivered stable operational results in 2017 with the continued focus on working capital bearing fruit in the form of satisfactory cash generation,” CEO Danie Pretorius said.
Master Drilling’s headline earnings per share in U.S. currency terms decreased 18.9 percent to 11.6 cents, and was down 26.5 percent to 154.4 cents in rand terms.
The company said an uptick in the global economy and commodity cycle was expected to have a positive impact on its business.
“Our pipeline is strong and we are excited about our entry into India and Australia, further diversifying our geographical exposure,” it said.
Geographical diversification bodes well for South Africa’s Master Drilling
JOHANNESBURG (miningweekly.com) – South Africa-based raisebore driller Master Drilling’s expansion into new markets, particularly its recent entry into India and Australia, should stand it in good stead to benefit from a global uptick in the commodity cycle.
The JSE-listed company in November announced its entry into the Indian and Australian markets and in February bought Swedish firm Bergteamet Raiseboring Europe, which it intends to use as a launchpad for further expansion in Europe.
In an interview with Mining Weekly Online on Tuesday, CEO Danie Pretorius said that the group lacked exposure in some of the countries where the world’s major mining companies operate.
“We are at an exposure rate of between 30% and 40% in doing business in some of these countries, which include India, Australia, the US, Asia and Canada,” he said, adding that Master Drilling would aim to increase its exposure in those regions.
Pretorius stated that a stronger global economy and an upswing in the commodity cycle had a positive impact on its order book, with committed orders of $124.7-million and a “healthy” pipeline of $228.1-million.
The strong order book should have a positive impact on the group’s revenue in the next reporting period.
In the 2017 financial year to December, Master Drilling’s revenue increased by 2.8% to $121.4-million, while operating profit decreased marginally to $24.8-million.
The firm’s South African rand earnings per share (EPS) decreased by 27.1% to 153c, while the US-dollar equivalent EPS decreased 19.6% to 11.5c. South African rand headline earnings per share (HEPS) decreased by 26.5% to 154.4c and the US-dollar HEPS decreased by 18.9% to 11.6c.
An impairment on the company’s South African black economic empowerment transaction had a negative effect of about $1-million.
An investment in further human capital to drive future growth in the business, lower utilisation rates and the exchange rate effect of emerging currencies had a negative impact on the company’s profit after tax, which fell from $22.32-million to $17.45-million.
Pretorius said in a statement that it was a positive result given that one of the group’s machine categories, the XX-large machines category, was used only 40%.
Meanwhile, he said that new management strategies and actions implemented in some challenging regions had turned most of the company’s underperforming businesses around.
As a result, the company expects an improvement in most global regions where it does business during the next reporting period.
Pretorius further noted to Mining Weekly Online that the company was “particularly proud” of the launch of its Mobile Tunnel Borer last month, which was set for delivery in September and commissioning in October this year.
This disruptive technology allows for continuous mining and requires no blasting, significantly enhancing mining efficiencies, he explained.
While Pretorius explained that there was a definitive shift in industry discussions regarding digitalisation, automation, innovation, a focus on carbon footprints, as well as on how to deal with global issues (such as the water crisis), he said that the company’s innovative advancement in its technology and proven, long-term industry experience, placed it in a strong position to continue to support its clients’ drive to improve productivity and efficiencies, while reducing operational costs.
The solutions and service provider aims to continue striking a balance between continued investment in capital projects to support its future growth, while enhancing shareholder returns through the distribution of dividends.
For the reporting period ended December 31, the Master Drilling board declared an annual gross dividend of 26c per share on March 19
Master Drilling CEO Danie Pretorius shares outlook for company
Master Drilling reports resilient annual results in a challenging environment
Master Drilling Group today released its Annual Results for the year ended 31 December 2017. Revenue increased 2.8% to $121.4 million and operating profit decreased marginally to $24.8 million. This was a positive result given that one of the Group’s machine categories, the XX-large machines category, was utilised only 40%. Cost of sales increased in line with the increase in revenue bringing about a flat gross profit percentage in US$ terms.
Commenting on the results, Danie Pretorius, CEO of Master Drilling, said “Despite 2017 having been a challenging year with various political changes across the world and a tough local macroeconomic environment, we delivered stable operational results in 2017 with the continued focus on working capital bearing fruit in the form of satisfactory cash generation.
“The uptick in the global economy and commodity cycle is expected to have a positive impact on our business going forward. Our pipeline is strong and we are excited about our entry into India and Australia, further diversifying our geographical exposure. The recent acquisition of Bergteamet Raiseboring Europe provides a launchpad for further expansion in Europe. There are many synergies between the two companies and this business complements our focus on providing innovative tailored technology solutions to our clients.
“New management strategies and actions implemented in some challenging regions have turned most of our underperforming businesses around. As a result, we expect an improvement in most global regions where we do business during the next reporting period. We will continue to balance investments in technology and people that support growth with the need to drive efficiencies and productivity ratios across the group. This approach coupled with our diversification strategy across regions, commodities, currencies and industries will see our revenue and margins stabilise further,” added Pretorius
Whilst escalating cost pressures in the mining sector continue to be a challenge, Master Drilling remains well positioned to expand its service and product offering strategically into other industries as well as additional geographies because of continuous technological innovation.
“We are particularly proud of the launch of our Mobile Tunnel Borer in February 2018. This disruptive technology allows continuous mining and requires no blasting, significantly enhancing mining efficiencies. Because it is as advantageous at the capital stage of mining projects, with quicker deployment and access to the ore body, as it is at the production stage through substantial productivity increase when opening reserves or increasing a mine’s underground primary and secondary infrastructure, we believe this will open the doors to more opportunities in future.” said Pretorius.