This summary is based on the first quarter fiscal 2009 earnings call conducted by Joy Global Inc. (JOYG) on March 4, 2009.
Management:
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President and CEO: Mike Sutherlin
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EVP, CFO and Treasurer: Mike Olsen
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VP, IR and Corporate Communications: Sara Wilkins
Key Investors Issues
- Net sales were $755 million, up 18% from $640 million last year.
- Net income was $86 million or 83 cents a share, up 21%.
First Quarter Highlights
Net sales were $755 million compared to $640 million last year, an increase of 18% despite a $66 million reduction due to translating sales.
- The current quarter benefited from the inclusion of $80 million in sales of conveyor products from the Continental acquisition, which took place in the second quarter of the 2008 fiscal year.
- Excluding these two factors, net sales for the underground and surface mining equipment businesses increased approximately $100 million or 16%.
- The underground mining equipment business increased 28%, while the surface mining equipment business was substantially flat.
Net sales of original equipment for the underground equipment business increased by approximately $70 million; while sales of aftermarket products and services increased by approximately $30 million.
- Sales were strong in the United States, Australia, and South Africa more than offsetting softness in China and Eurasia.
- For the surface mining equipment business, a slight increase in aftermarket revenue was substantially offset by a similar decrease in original equipment sales.
- Increased sales in North America were offset by lower sales in South America and Australasia.
Operating profit was $135 million compared to $111 million in 2008 with the $24 million increase inclusive of a $10 million reduction due to the foreign currency translation.
- Operating profit as a percentage of sales increased from 17% in the first quarter last year to 18%, a result of the increase in net sales and the control of costs.
- Operating profit for the underground mining equipment business increased from $63 million a year ago to $87 million, with the return on sales percentage of 22% compared to 18% last year.
- This improvement was due to increase in net sales and our aggressive management of spending during the current quarter.
Net income was $86 million or 83 cents a share, up 21% from $71 million or 65 cents a share last year on strong sales.
- New order bookings in the current quarter were $538 million compared to $870 million in the first quarter a year ago.
- Current quarter bookings were reduced by $84 million due to the impact of foreign currency translation and by a $161 million of order cancellation including the benefit of $68 million of bookings for the Continental conveyor products.
A total of $95 million worth of orders were cancelled from surface mining equipment customers, with $61 million associated with original equipment and $34 million associated with aftermarket backlog.
- The underground equipment business reported $59 million of original equipment orders cancelled and the crushing and conveying business reported a $7 million order cancellations.
- Backlog was just below $3 billion compared to $3.2 billion at the beginning of the quarter.
- The firm used $36 million for the operations compared to generating $86 million last year primarily due to increases in inventories in anticipation of increased shipments in the next several quarters.
Overview of Markets:
- Declining commodity demand and falling prices have reducing customer profitability and cash flow hence reductions in capital budgets, with some of the announced cuts have been in the 50% range.
- The firm has had no cancellation clauses in its contracts for major equipment, such as shovels and longwall systems and continue to enforce these clauses.
- However, the current market conditions go well beyond the scope of normal negotiations and the cancellations have been in conjunction with a series of other drastic actions taken by the customer.
The cancellations received in the first quarter and to date are within the backlog risk ranges previously disclosed, both by category and by magnitude.
- The Central Appalachia cancellations were all for room and pillar equipment, and the aftermarket cancellations were primary for scheduled machine rebuilds.
- The rebuild cancellations were the result of the customer accepting the scheduled delivery of new shovels and parking their older shovels that would have been rebuilt in 2009.
- Cancellations will not affect the revenue levels we have guided for 2009 and will have limited impacts on 2010.
- Joy Global is continuing with its development of longwall automation, semi-autonomous shovel operation, and spot services to enable it to deliver technology with reliability.
