Shannon-based engineering services firm Mincon has acquired one of Europe’s leading tungsten carbide manufacturers in a deal which will add almost €5m to its annual revenue.
Mincon, which specialises in the making of drilling equipment for mining and exploration firms, is financing the deal from cash raised in its dual Dublin and London flotation in 2013.
A downturn in the mining industry saw Mincon’s profits dip by over 30% last year to €10.3m; but it still managed to grow revenues by 4% to €54.5m. Yesterday’s announcement sees it improve its product offering by purchasing, for an undisclosed sum, the Sheffield-based Marshalls Hard Metals Ltd, already a seasoned supplier to Mincon, which represents 20% of its sales. According to analysts, the deal represents another step in Mincon’s growth plan, set out at the time of it going public.
“At the time of its IPO, Mincon identified the acquisition of a tungsten carbide manufacturer as a key part of its growth strategy,” said Davy analyst Colin Sheridan.
“With steel treatment currently done in-house, the flexibility of also controlling the carbide manufacturing process will give the company a better handle on the quality of its product, enabling it to further enhance its reputation as one of the best-in-class providers of rock-drilling consumable products in the industry.”
While the Marshalls deal — the UK company will be transferred to a new entity called Marshalls Carbide Ltd, wholly owned by Mincon — will add to the Shannon firm’s revenues, earnings estimates for Mincon remain unchanged as Marshalls is not thought to be generating any operating profit at the moment.
“Despite the acquisition having a negligible effect on current profits at Mincon, there is significant additional value to be unlocked in the longer-term from having control over the manufacture of tungsten carbide,” said Mr Sheridan.
“The investment fits with Mincon’s strategy to increase its control over the production process employed in manufacturing its products,” said Gerry Hennigan of Goodbody Stockbrokers.
“Based on Marshall’s revenue outturn for the past year, we would expect ample cash resources remain for Mincon — €41m as of December. This should be used to fund further deal flow in the months ahead.”
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