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Emeco cuts costs in Mackay

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Mining services provider Emeco has dramatically reduced the number of people in their workshop in Mackay yesterday, with 28 salaried positions served with redundancies.

The Mackay workshop now has around 26 staff left, according to a spokesperson for Emeco.

The spokesperson said that the Mackay workshop has not closed, with "maintenance and external work, repairs, rebuilds, plant and blast, so they still have a presence in Queensland… in the short to medium term they just didn’t have enough work up there to sustain the workforce."

"The downturn in removal of overburden, which of course if the main thing that they do, all the miners are focusing on high grade, low strip ratio to respond to lower commodity prices, that means less overburden removal and less work for Emeco…. It’s in response to those market conditions and the broader downturn in the industry", the spokesperson said.

Emeco's share price has performed extremely poorly, according to a report released yesterday by the Australian Private Equity and Venture Capital Association, which examined Australian initial private offers (IPOs) made since 2003, with a minimum offer size of $100 million.

The report shows that Emeco Holdings (EHL) offered shares at $1.85 in 2006, to the amount of $942 million, however the share price on 11 April 2014 was 25 cents.

The price has steadily dropped from the $1.00 mark over the past 24 months.

The Australian reported today that Emeco was "one of the worst performing floats to come out of private equity ownership".

Emeco has recently refinanced its debt facilities with a US$335 million senior secured notes offering.

This offering was made in conjunction with a new A$50 million secured Australian bank facility.

Emeco announced the pricing of the US$335 million in aggregate principal amount of 9.875% senior secured notes due in 2019, to institutional buyers in the US.

Emeco saw a rush on the offering, stating that "the offering was oversubscribed with a high quality order book," however it added that "the company reduced the size of the notes offering from US$360 million to US$335 million due to continued debt pay from from operating cash flow and asset disposals since December 31, 2013," which reduced its refinancing needs.

The proceeds of the offering were to be used to pay existing debt outstanding under the USPP Notes and Australia senior bank facilities.

Former Emeco CEO Keith Gordon was replaced in October 2013 by the present CEO, Ken Lewsey.

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