This summary is based on the fourth quarter fiscal 2008 earnings call conducted by Joy Global Inc. (JOYG) on December 17, 2008.
Management:
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President and Chief Executive Officer: Mike Sutherlin
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Executive Vice President, General Counsel, Secretary: Sean D. Major
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Executive Vice President, Chief Financial Officer and Treasurer: Michael S. Olsen
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Corporate Controller: Gene Furman
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Vice President, Investor Relations, and Corporate Communications: Sara Leuchter Wilkins
Key Investors Issues
- Net sales increased 36% to $3.4 billion from $2.5 billion in 2007 with the Continental acquisition contributing $251 million of this $900 million increase.
- Earnings came in at $374 million or $3.45 a share, 34% from $280 million or $2.51 in 2007 due to revenue growth.
Fourth Quarter Highlights:
- Net sales topped $1 billion for the first time and were 40% higher than net sales in the fourth quarter last year.
- Net income was $118 million or $1.11 per share, up 69% compared to $70 million or 64 cents per diluted share last year.
- The firm repurchased approximately $266 million of outstanding shares.
Full Year Highlights
Bookings totaled $4.8 billion, up 66% compared to $2.9 billion in 2007 with $273 million resulting from the acquisition of the conveyor business of Continental Global Group.
- Excluding the Continental new orders bookings increased by 57% with a 52% and 63% increase in new orders for the underground mining equipment business and surface mining equipment business respectively.
- For both the underground and surface mining equipment businesses the increase in bookings were led by significant original equipment orders, but also both businesses reported double-digit increases for after market orders as well.
- Net sales increased 36% to $3.4 billion from $2.5 billion in 2007 with the Continental acquisition contributing $251 million of this $900 million increase.
Operating income increased from $473 million in 2007 to $551 million in 2008 which included a $23 million charge for a cancellation of a surface mining equipment repair and maintenance contract.
- Earnings came in at $374 million or $3.45 a share, 34% from $280 million or $2.51 in 2007 due to revenue growth.
- Cash generated by operations increased from $382 million to $577 million in the 2008 fiscal year.
Market Overview:
- The continued weakening of the world’s economies is putting downward pressure on commodity demand and pricing and on customers’ cash flows.
- Customers have been acting quickly and decisively to keep production in balance with demand and will continue to do so.
- This will keep from building excessive stockpiles or excess capacity, both of which would only prolong the recovery and act to depress prices.
- As they do so, customers are high-grading existing operations and are being more selective about expansion projects.
Cuts in iron ore have reached 6% of worldwide production in response to lower steel production and to offset overstocking.
- Iron ores spot prices have already been cut in half and are now below contract and contract prices are expected to come off by 20% which will still leave seaborne prices high after they have gone up 400% in the previous four years.
- If coal exports from China are a barometer met coal prices could go down 40%, but it would still be at historically strong prices.
- Volume cuts will be mitigated by downgrading with lower quality returning to the thermal coal markets.
Thermal coal prices have held up better than other commodities and are ahead of a year ago levels.
- Thermal coal is used primarily for power generation and this demand varies the least with economic performance.
- In addition, the next round of new power plants in the US and Europe will be coal fired and the US has as much as 15% to 20% of additional coal fired capacity through higher plant utilization.
- Copper prices are down significantly from their recent peak and from a year ago.
- Although oil prices are down they are stabilizing well above the cash cost of oil sands production and therefore established producers will continue to operate at capacity.
Fiscal 2009 Outlook:
- The firm expects fiscal 2009 revenues to be $3.5 billion to $3.7 billion.
- It expects to deliver earnings per fully diluted share between $3.60 and $4.00 in 2009.
Key questions and answers from the fourth quarter earnings call conducted by Joy Global Inc. (JOYG) on December 17, 2008.
