Mincon earnings set to drop by more than 20%

Full-year earnings at Shannon-based engineering services firm, Mincon, are expected to drop by over 20%, with revenues dipping by over 10% in 2014 before recent acquisitions start contributing to its bottom line next year.

Last week the company published its first set of figures as a public entity, but disappointed with first-half revenues dropping, year-on-year, by 15% to just over €23.4m; operating profit falling by 37% to almost €5.2m and earnings per share down by 43% to 2.11c.

“Numbers from Mincon, last week, were very disappointing,” Colin Sheridan of Davy Stockbrokers said in a research note yesterday.

“Despite flat volumes in Mincon product, guided business has not materialised on new sites and market share has been lost in some areas,” he added.

A weak first-quarter — driven by challenging exchange rate trends — was the chief drag on Mincon’s first-half results. Davy now expects the company to post full-year revenues of €51.5m for this year, as a whole, €5.3m, or just over 9%, lower than its original forecast. Market share losses in Africa and slow business growth in its South American operations have largely led to this re-think. EBITDA is expected to be 23% lower than originally forecast, at €14.2m.

However, Davy expects the currency situation to “abate somewhat” as the year progresses. It also noted that the second quarter showed much stronger business recovery signs than the first three months of the year, and said recent acquisitions should boost earnings next year. Second-quarter sales were around 30% up on the first quarter and that level of growth is expected in the current and last quarters of this year.

Mincon — whose drilling equipment was used in the 2010 Chilean miners rescue — last week announced details of the purchase of majority stakeholdings in three companies, upping its presence in North America, Africa and Australia/Asia Pacific.

While each is profitable, acquisition costs will mean zero bottom line contribution this year. Operating profit should increase by around €1.4m and revenue by around €7m, however. Davy expects each purchase to be accretive in 2015. Including the effect of the acquisitions, Davy expects Mincon’s 2014 revenues to grow by around 3%.