2nd UPDATE: Joy Global Sees Recovery In China Coal, Steel
05 March 2009 - 6:22AM
Dow Jones News
The top executive at Joy Global Inc. (JOYG) forecast that
emerging markets such as China will lead a rebound in the global
mining sector.
The world's largest maker of heavy-duty mining equipment has
suffered order cancellations and pushed delivery of some of its
backlog into 2010 as it wrestles with some customers cutting
investment spending in half.
"We're seeing a lot of projects that we had queued up, pushed
back until later years," said Mike Sutherlin, president and chief
executive of the Milwaukee-based company.
Sutherlin told analysts on a conference call that orders for new
equipment are likely to fall by as much as 75% from their peak in
2008 before rebounding in 2010.
However, he noted that the economic slowdown in China has eroded
coal and steel inventories, following a sharp decrease in imports
and domestic production.
These stocks will have to be replenished in the wake of the
country's latest stimulus effort, which could be announced as early
as Thursday.
"I think we're starting to see some data out of China that's
early but encouraging," Sutherlin said. "We're starting to see iron
ore stockpiles at the ports begin to lead some steel capacity
that's come back online."
Joy Global shares were up 12% at $17.75 in post-call trading,
with shares in other companies reliant on emerging-market commodity
and infrastructure projects also gaining ground.
Caterpillar Inc. (CAT) was up 15% and Alcoa Inc. (AA) gained 14%
as expectations mounted that China would accelerate efforts to
revive growth and investment.
Joy Global and crosstown rival Bucyrus International Inc. (BUCY)
have been key beneficiaries of China's infrastructure boom,
supplying equipment to the country's fragmented coal sector. Joy's
shares peaked as high as $90 last June.
Sutherlin's forecast came as Joy beat expectations with an 21%
rise in fiscal first quarter earnings and reiterated guidance for
2009.
Given cancellations, the company said orders this year will be
well below 2008 levels and may erode its $2.9 billion backlog, down
7% from end-October. The company figures 5% to 15% of its order
backlog is at risk for cancellation.
In the first quarter, cancellations reached $161 million with
40% coming from Central Appalachian coal customers and North
American iron ore miners.
Net profit rose to $85.7 million, or 83 cents a share, in the
quarter to Jan. 30. This compares with $71.1 million, or 65 cents a
share, a year earlier.
Revenue grew 18% to $754.9 million as U.S. sales climbed 46%.
The increases were aided by the addition of a conveyor business
last year. According to Thomson Reuters, analysts expected earnings
of 76 cents a share on revenue of $782 million.
Operating margin in the quarter edged up to 17.9% from 17.4%.
The company said it has implemented a hiring freeze, clamped down
on discretionary spending and is conducting more critical reviews
of the financial condition of its suppliers and customers.
Guidance for 2009 was maintained at $3.60 to $4 per share on
revenue of $3.5 billion to $3.7 billion.
-By Bob Tita, Dow Jones Newswires; 312-750-4129;
robert.tita@dowjones.com