It wasn't the strongest of reactions to a solid profit that we saw yesterday for the annual results for mining services and engineering group, Bradken.
It reported what it said was a 45% rise in net earnings, which would have normally pleased any hard-nosed fund manager or shareholder.
And, after an initial surge of joy in the general morning rebound from Monday's sell off, Bradken (BKN) shares jumped to $10.16 after the figures were released just before trading started. They had closed at $9.70 on Monday and they opened at $10.06.
But second thoughts appeared and the shares sank to a low of $9.56 with investors forming the view that the result may have been a bit light on. The absence of any firm guidance for the 2008 financial year was also noticed.
Bradken said net profit after tax hit $49.1 million for the 2007 financial year, compared with $33.9 million last year. As well, there was a 50% increase in dividend, up from 21 cents to 31.5 cents.
The shares were sold down until they bottomed in yesterday afternoon and had a small recovery to end 15c up at $9.85.
But with a market consensus of net earnings of $49.8 million, and leading broker, Goldman Sachs JBWere, a long time supporter, with a top end estimate of $51.4 million, the company's performance will be reassessed. Don't be surprised to see the stock shake off yesterday's mixed trading blues.
Were's liked the result and told clients as much in its morning note Wednesday.
Bradken managing director, Brian Hodges, said the company's main drivers of growth – mining volumes, rail demand, EBITDA expansion and acquisitions – would continue "to provide a platform" for sustainable earnings growth.
"We have confidence in the continued growth in China and longer term strength of the resources cycle and believe that Bradken is well placed to continue to benefit from the growth in these mining related markets," Mr Hodges said.
"At the same time, the market for rail wagons remains at high levels as mine capacities continue to increase and general rail freight expands.
"We are confident that Bradken's main drivers of growth … will continue to provide a platform for sustainable long-term earnings growth."
But that was as far as the company went in looking to the future.
Mr Hodges said Bradken would continue to review potential acquisitions in Australia and overseas, to complement the company's product offering and to improve the overall quality of the company's earnings.
Earnings before income tax, depreciation and amortisation (EBITDA) rose 32%, from $77.4 million to $102.6 million.
Sales revenue was up 17%, from $547.8 million to $639.7 million, and earnings per share jumped 45% 46.3 cents.
Bradken declared a fully franked final dividend of 17 cents, bringing the full year dividend to 31.5 cents per share, an increase of 50 per cent on last year. That final dividend of 17c was 1c above consensus.
The Company's dividend reinvestment plan remains suspended and the dividend will be payable on 4 September 2007 with a record date of August 21.
The Mining Division increased its sales revenue by 12% over the corresponding period. Continued growth in mine production volumes, particularly for iron ore and coal, underpinned growth in mining consumable sales, with crawler shoes the standout performer on the back of a worldwide increase in demand for mining consumables and equipment.
Copper and gold production volumes in Australia were lower in FY07 and this, combined with the rundown of inventories and consignment stock at some mines saw revenue levels reduce for the Mineral Processing Division. Gross margin percentage continued to improve, largely offsetting the impact of lower volumes.
The acquisition of the Wundowie and Boogan businesses boosted the Industrial Division's result, providing a revenue increase of $22.4m. On a like-for-like basis, excluding these acquisitions, sales of $65.2m for this division were 2.4% higher than the corresponding period. The Industrial Division's order book remains strong.
During the year, Bradken completed acquisitions of Wundowie Foundry (WA), Firth Rixson Castings (UK) and Boogan Implement Company (QLD), as well as acquiring a 19% equity investment in AmeriCast Technologies (USA) in conjunction with Castle Harlan Inc (New York).
"The Wundowie Foundry adds substantial capacity and synergy savings opportunities to our wear plate and block products at a time when we are expanding into offshore markets," said Mr Hodges.
The acquisition in December 2006 of the Firth Rixson Castings business in the UK resulted in the creation of Bradken's new Power & Cement Division, which reported sales of $29.8m for the trading period between December 11th 2006 to June 30th 2007. "This acquisition extends Bradken geographically while maintaining our focus on differentiated consumable products," Mr Hodges noted.
In April 2007, Bradken acquired the Boogan Implement Company in Queensland, which was purchased to bolster the Company's market position in the sugar industry as well as broadening its range of products.
"This business has been very successful at capturing demand for engineered consumables used in the processing of sugar cane and now holds a significant market share," Mr Hodges added.
Trading by the three businesses acquired in FY07 accounted for $52m of revenue and $10.8m of EBITDA, with all the acquisitions trading in line with or better than expectations held at the time of purchase.
AmeriCast produces the largest castings in North America for the rail and mining transport industries and with its acquisition of Atlas Casting and Technology in April 2007, has cemented its position in this market. The company has combined sales revenue of approx
