Joy Global reports drop in quarterly profit
The dismal state of the coal industry has taken a toll on equipment maker Joy Global which reported a two-thirds drop in quarterly profit. However, the company did see an increase in maintenance revenue as some of the companies that have put off purchasing new equipment are finding greater need to work on older equipment.
Caterpillar Inc, the world's largest mining and construction equipment maker, has also seen a decline in demand for mining equipment and earlier warned about weak investment by customers.
"While the economic outlook is improving and should provide some demand catalyst, commodity oversupply and a depressed pricing environment are straining miner cash flows and slowing capital expenditures," Joy Global chief executive Ted Doheny said in a statement.
Over the past year, top U.S. coal miners such as Peabody Energy Corp, Alpha Natural Resources Inc. and Arch Coal Inc. have cut expenditure on mining equipment such as longwall shearers, giant shovels and draglines, Reuters reported.
However, Joy Global raised the low end of its 2014 profit forecast range as it cuts costs and as miners booked in equipment for long-delayed maintenance.
The company reported a 3.7 percent rise in service bookings in the first quarter ended Jan. 31 - the first quarterly increase in more than a year. Maintenance made up 71 percent of bookings in the quarter.
Joy Global's bookings fell 16 percent to $860.5 million in the quarter. Coal miners account for about two-thirds of the company's revenue.
Joy Global, which also supplies miners of copper, iron ore and other minerals, kept its forecast for 2014 sales of $3.6 billion-$3.8 billion but raised the lower end of its profit forecast range by 10 cents to $3.10.
Analysts on average were expecting earnings of $3.29 per share on revenue of $3.72 billion, according to Thomson Reuters I/B/E/S.
Product development, selling and administrative costs fell 2.7 percent to $153 million in the first quarter ended Jan. 31.
Net income fell to $48.9 million, or 48 cents per share, in the quarter from $142.1 million, or $1.33 per share, a year earlier.
Excluding items, Joy Global earned 49 cents per share, but missed the average analysts' estimate of 64 cents.
Revenue fell 27 percent to $839.3 million but was above the $835.4 million analysts expected.