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Johannesburg - Opencast mining contractor and construction materials supplier Buildmax [JSE:BDM] on Friday reported a headline loss of 7 cents per share for the six months ended August 2010 from headline earnings per share of 3.7 cents previously.
It reported a headline loss from continuing operations of 5.2 cents for the period from headline earnings per share of 2.6 cents earlier.
Buildmax reported core headline loss of 6.4 cents from core headline earnings per share of 4.5 cents in 2009.
It noted a basic loss from continuing and discontinued operations of 31.6 cents, from basic earnings of 3.2 cents previously.
Revenue from continuing operations advanced to R659.75m from R632.678m previously with a loss of R297.28m from a profit of R24.997m in 2009.
The group successfully raised R300m through a rights offer earlier this week.
"The industries in which Buildmax operates continue to be affected by the global economic crisis. The group's principal business - opencast mining services - is, amongst other factors, highly dependent on fleet replacement and securing reasonable prices for its second-hand equipment. The low levels of activity in global markets in the wake of the economic downturn have resulted in a surplus of second-hand equipment and vehicles, which has reduced second-hand resale prices by as much as 50%, to the detriment of the group," Buildmax said.
It said this situation was expected to continue, negatively impacting on the group, as a substantial percentage of the fleet would need to be replaced in the next five years.
"In light of this and compounded by the tougher credit climate, Buildmax has been forced to continue with extending the useful life of assets beyond the ideal replacement cycle. Consequently production has been pressured and maintenance costs increased, which has reduced top and bottom line growth," Buildmax said.
Revenue from discontinued operations declined to R69.669m from R324.64m previously. The group said it expects to wind down Vukuza Earth Works, including the sale of assets, by the end of FY2012.
Revenue for its mining services decreased 32.9% to R488.2m while EBITDA reduced by 64.5% to R56m.
For construction materials revenue dropped 12.3% to R201.1m, while EBITDA declined to R5.5m, from R29.3m in 2009.
Looking ahead, Buildmax said the coal remains one of the cheapest sources of energy in the world.
"Its abundant reserves compared to other fossil fuels means that it is likely to remain the primary source of energy for the foreseeable future.
"While Eskom has curtailed its projected demand for coal over the medium-term and has announced its intention to introduce alternative energy sources, the continued roll-out of coal fired power stations coupled with international demand for thermal coal, particularly from China and India, should ensure continued growth in this sector," it said.
Additional export capacity continues to come on stream at Richards Bay, Durban and Maputo. Exports from Richards Bay for the first ten months of 2010 are higher than the corresponding period last year. Further, Transnet has announced that it intends to increase the size of its rolling stock fleet which should alleviate some bottlenecks currently experienced by coal exporters, according to Buildmax.
It pointed to "meaningful contractual relationships with the leading mining groups in the country, which it intends to extend for mutual benefit".
"Mining Services is well positioned to participate in additional coal mining supply chain activities that are less capital intensive going forward," Buildmax said.
"Management is currently formulating a strategy in this regard. The directors are optimistic that this market will provide profitable opportunities for the mining services business unit in the future.
"It said that the outlook for the construction industry would be reliant on spending by government and the private sector. The dearth of credit continues to hamper public sector projects while high levels of debt, excess stock and a lack of bank funding continue to impact negatively on the private sector. Forecasting the timing of a recovery in the construction sector is extremely difficult," Buildmax added.
"However, the current trend in the Construction Materials business unit is not expected to reverse until, at the earliest the latter half of 2011 or early 2012," the group said.
It said that the businesses were well positioned to benefit from improved trading conditions as and when they occurred.
The group said that restructuring of the mining services business unit would only be completed towards the end of the 2010 calendar year. "An improvement in results is nonetheless expected for the six months to year-end, albeit that a loss is still anticipated. The proceeds of the rights offer and the right- sizing of mining services will lead to an improvement in Buildmax's financial position, with borrowings expected to decrease significantly by end-FY2011," it said.
"Management's identification of the need to diversify into less capital intensive business activities in the Mining Services business unit should contribute towards future growth," Buildmax concluded.
