Manufacturing News

Joy Global sees massive fall in revenues year on year

Mining machinery manufacturer Joy Global has recorded a hard 2013, reporting drops across the board in its latest operating results.

In the fourth quarter of this year it saw sales drop 26% and bookings down 19% from the previous corresponding period, according to a company statement.

It’s net sales fell from USD $1.594 billion to USD $1.181 billion in the October quarter year on year.

Cash from its operations have also fallen 7% down to $195 million.

Joy also recorded a huge $155 million pretax non-cash intangible asset impairment charge as part of its global branding initiative.

Despite the gloomy outlook Joy did see less of a slump in its underground machinery segment bookings only recording a 5.7% decline, compared to its surface mining equipment which recorded a 31.6% fall.

It also recorded only a minimal drop in its aftermarket products, with a 3.1% change that was mostly supported by increased demand in Eurasia, although it saw a fall of more than a third for original equipment bookings.

In regards to net sales, Joy Global’s underground equipment division also saw less of a fall, with only a 15.9% decline dropping from USD$827.5 million to USD$ 696.3 million, whilst sales of its surface mining equipment again bore the brunt of the decline year on year, sliding 36% from USD $837.43 million down to USD$ 535 million.

President of Joy Global, Mike Sutherlin, was still optimistic in the face of the downturn.

“This quarter once again demonstrates outstanding execution in a difficult market,” he said.

“We were very encouraged by the sequential recovery of aftermarket orders. This puts us almost back to the levels of a year ago, even though some regions are still lagging. It was especially good to see the return of machine rebuilds to the U.S. underground business, which is an important step in the recovery of this market segment.

“As lead times come down, the historical lumpiness has returned to our order rates. The third and fourth quarter bookings bound a range that we expect to continue in 2014. Although we booked a major longwall project this quarter as expected, there are fewer other projects moving forward which meet today’s stringent criteria of operating on the lower half of the global cost curve.

“With a limited number of projects that can book in time to help 2014, we continue to see both the need and opportunity to lower the cost base in our business. Much of the costs we have taken out so far are structural reductions coming from our Operational Excellence program and One Joy Global initiative, and this will improve our leverage on market recovery.”

Sutherlin went on to outline the company’s cost cutting initiatives.

“We have made substantial progress in streamlining our businesses and regions, and are now taking the next step of consolidating our surface and underground businesses and products under the Joy Global brand. Although the reduced value of the separate brands results in a non-cash charge, this is an important step that will continue to make us more efficient, responsive and competitive.”

Executive vice president Ted Doheny then painted a difficult picture for the company in the coming year, with a slight upswing as the industry recovers.

“Current market conditions have created an environment where higher cost mines are being closed and projects with only the strongest financial returns are being approved. Industry capex in 2013 declined further as falling commodity prices reduced our customers’ cash flow and caused the industry to re-evaluate expansion projects,” Dohney said.

“Looking forward, thermal coal capex will remain under pressure but appears to be near the bottom. Met coal capex will likely slow after several years of investment. Copper should remain high on prospect lists as current prices support most of global production, and iron ore projects will move forward selectively. Although we believe our markets overall will begin to improve in 2014, the timing is difficult to predict. Until a sustained demand catalyst emerges, we expect our customers will continue to be cautious and selective in deploying capex.”

He also pointed to a resurgence on the back of Chinese demand.

“Our focus for 2014 will be to drive our key strategies for growth, operational excellence, talent development and delivering long term value for our shareholders.

“We are accelerating the application of Joy technology and operational excellence programs into our local China product groups, and believe these new products will generate incremental sales growth in 2014.”

Doheny also stated that there would be more ‘restructuring’ for the business, but failed to elaborate what this may mean exactly for the manufacturer, except that it will  “continue to shift our production capability eastward close to our demand growth potential”.

“This will enable us to optimize our global manufacturing and service center footprint while achieving our leverage targets. For the year, these restructuring costs are expected to be approximately $15 million.”

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