Mincon Group PLC Falls As Profit Plummets

What: The share price of Mincon Group (LSE: MCON) — an Irish engineering group, which specialises in the design, manufacture, sale and servicing of rock drilling tools and associated products — has slumped by 10% so far today, following half-year results that showed  revenue down 15% and operating profit down 37%, compared to the same period last year.  Earnings per share plunged 43% compared with H1 2013, to 2.11 cents. 

So What: CEO Kevin Barry attributed the poor results to “weakness in the global exploration and mining market”, which he said was “driven by the decline in the price of precious metals.” He also commented that the “significant devaluation” of currencies in Mincon’s key markets had further impacted adversely on the first-half’s results. 

Demand for third-party products sold by Mincon suffered badly, with revenue from them dropping 38% from the same period last year.  However, Barry highlighted the fact that demand for Mincon’s own products had remained stable — the 7% decline in revenue generated by them was, he said, entirely due to adverse currency movements, especially in the South African Rand and Australian Dollar.

What Now:  The company says that it believes the weakness in the global drilling market started to abate in the second quarter of this year, when it invoiced sales 14% ahead of the average for  previous three quarters. It also said that it expects that third party product sales will improve in the second half, driven by the addition of new agencies for drill rig sales in southern Africa. 

Mincon also announced today that it has acquired a majority holding in three companies, at a total cost of €8.7m, which is says will “both increase and diversify Mincon’s product portfolio” and also extend its distribution network in its target markets of eastern Australia and southern Africa.

Despite the poor results, Mincon’s board is recommending its first dividend as a listed company, with a proposed interim payment of 1 cent per share.

Mincon’s share price is currently down 20% so far this year, during which time the FTSE All-Share has remained essentially flat (it’s dipped 0.1%).