Joy Global reports 15 percent fall after cutting 2015 forecast

September 4, 2015

As the global commodity downturn continues its not just the mining companies that are feeling the pain of the lower prices, but also those that support the industry. Bloomberg reported that Joy Global, the world’s last manufacturer of underground mining equipment, reported a 15 percent decline in share price after cutting its forecast for fiscal 2015 earnings and revenue. It is the largest drop for Joy Global in six years.

Joy Global fell to $18.90 on Sept. 3 at the close in New York, the most since November 2008 and the biggest decline of the day in the Standard & Poor’s 500 Index. Joy’s shares have plunged 59 percent this year as struggling miners buy less machinery. Caterpillar Inc., a rival mining-equipment maker, fell 2.2 percent to $74.45, the biggest decline in the Dow Jones Industrial Average.

Adjusted profit in the fiscal year through October will be $1.80 a share, Milwaukee-based Joy said in a statement. That compares with a projection in June for per-share profit in the low end of $2.50 to $3, and the $2.42 average of 20 analysts’ estimates compiled by Bloomberg. Revenue this year will be about $3.1 billion, lower than the $3.3 billion to $3.6 billion the company had earlier forecast and the $3.28 billion average estimate.
Joy is among equipment makers suffering as their customers around the world cut capital expenditures, idle mines and reduce output amid a global commodities rout.

“This one has been a steady downturn and we gave you a pretty rough outlook, a pretty brutal outlook on commodity,” Chief Executive Officer Ted Doheny said on a conference call to discuss the results. “We think we can help our customers right now in this tough market drop their cost curve with some new products and new technologies.”

Doheny is working to offset fewer sales of new equipment with revenue from replacement parts and service, and spent $122 million to buy mining-equipment manufacturer Montabert SAS, increasing Joy’s exposure to hard rock-mining customers and reducing reliance on coal producers.

“With basically every global end market that Joy participates in oversupplied and indications that demand remains lackluster at best and under pressure at worst, it is hard to see the declining order/earnings trend reversing in 2016,” Joel Tiss, a New York-based analyst at BMO Capital Markets, said in a note.

U.S. coal production will fall to about 917 million tons this year, the lowest in 29 years, according to the Energy Information Administration.


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