Investors gave metal basher Bradken (BKN) a right old hammering yesterday after it apparently (in the minds of investors) under-delivered on the interim profit and the 2014 full year forecast.
The shares were sold off savagely – shedding more than 11% in early trading to a low of $4.62. They ended trading at $4.72, still down 9.4%.
Not helping confidence was a sharp cut in the interim dividend to 15c a share, from 20c a share paid a year ago.
The reason for the mauling was easy to see, some investors burned themselves by bidding up the shares in recent days.
Investors completely misread the situation and on Friday and Monday had pushed Bradken shares more than 8% higher, from $4.83 to $5.21 at the close on Monday.
Then the result came out before trading and down went the shares – from $4.85 at the start, to the low of $4.62.
The market’s adverse judgement was despite the interim profit of $38.1 million, a fall of 18.5%, beating market forecasts for around $32 million.
The fall was on a 17% drop in revenue to $564 million for the half year.
BKN 1Y – Bradken shares down on cut dividend and poor profit forecast
What wasn’t liked though by investors was the apparent shortfall on the full year estimate of around $180 million when the market had a figure of around $206 million pencilled in, a big miss.
The company had told shareholders at the 2013 AGM that December half earnings would be weak, which happened.
But investors seem to have been punting on the December half being the low point, with a rebound starting this half. Judging by the low estimate for the full year figure, that has been postponed, or investors horribly misread the industry and conditions.
Earnings before interest, tax, depreciation and amortisation were $86.2 million, slightly ahead of guidance, but that was ignored.
Also ignored was the confident commentary from the company such as:
“In spite of the first six months of this financial year being particularly challenging for Bradken with sales remaining at low levels, we slightly exceeded our first half guidance of $85 million EBITDA. Since June 2013, we have seen order intake levels strengthen for all consumable product ranges.
"Mine production levels are continuing to increase and we expect sales to improve through the second half,” Managing Director Brian Hodges said in yesterday’s statement.
"Although the sales contracted during the period, the quality of earnings was maintained with the EBITDA margin largely unchanged at 15.3% a decrease of only 0.2% over the previous corresponding period," directors told the market.
"Margins in Mineral Processing and Engineered Products were down slightly although margins in Rail and Mining improved due to cost reductions and manufacturing efficiencies. Net profit after tax was positively impacted by a number of one-off abnormal deductions including revised R&D claims from prior years."
