Mining equipment manufacturer Bradken cut 1000 jobs to weather the mining downturn and it looks like it has worked.
The company revealed yesterday it made a underlying net profit of $96.1 million for 2013, surpassing its own forecast from two months earlier.
Bradken was able to post a profit increase even with a drop in sales revenue due to its cost cuts that corresponded in the decrease in demand.
Speaking to The Australian, the company’s managing director Brian Hodges said the market was reacting to the company’s cuts and changes.
“It’s not so much a good result as it is a solid result,” he said.
“The market probably appreciates the cashflow and the resilience of the company, rather than this being a spectacular result, which it’s not.”
Its net profit was at $66.9 million, 33 per cent lower than its $100.5 million profit in 2012.
A significant amount of the profit decrease was due to a one-off charge of $30.4 million it incurred from the Norcast bid-rigging lawsuit.
Ruling out the lawsuit payment, net profit decreased by two per cent in the past year even though sales revenue dipped by 10 per cent.
Bradken reported a nine per cent increase in profit in February and had said the mining slump was over.
It had posted a net profit of $46.7 million in the six months to December last year, up $43 million from the previous year.
Bradken has culled 1075 jobs all over the world, with a workforce of 5425. The Australian workforce was reduced by 14 per cent.
Bradken’s sales numbers from its rail division slumped by 33 per cent due to its reliance on bulk commodities such as iron ore and coal.
Hodges indicated cost cuts and job losses could continue next year, as the company cuts the fat “in line with lower activity levels”.
He also predicts mine activity across most commodities would slowly rise next year, with oil and gas demand staying resilient.
Moelis & Co analyst Adam Michell said Bradken’s business model was more successful than others as it deals widely with non-discretionary consumable mining products.
“Financial risk is a relatively controllable issue for the company, and if they can keep the cashflow coming in and keep capex under control they should still be able to pay a fairly decent dividend,” Michell said.