JOHANNESBURG (miningweekly.com) – JSE-listed Eqstra’s return on equity (RoE) of 12.3% for the six months ended December 2012, was a “mediocre performance”, acknowledged CEO Walter Hill at the contract mining and equipment group’s interim results presentation on Thursday.

“This remains above cost of equity at 10.9%, so I trust we have not eroded value for shareholders, but am I happy with it, no,” he told investors.

However, Hill asserted that the 4.9% slump from the previous quarter’s RoE of 17.2% was somewhat skewed by the sale of the group’s Bucyrus business unit as well as a R35-million impairment reversal.

Eqstra was targeting a future RoE of around 20%.

Meanwhile, the company reported relatively flat basic earnings a share of 45.1c for the period from 47.1c for the six months ended December 2011, which was some way off the 89.4c a share seen at the 2012 financial year-end.

Revenue increased by 7% to R4.3-billion owing to increased production volumes recorded by its contract mining and plant rental business, a growth in leasing revenues from its fleet management business and increased new sales in the industrial equipment division.

Divisional Performance
The company reported overall good growth across its industrial equipment business, with the South African forklift market share increasing for the period, despite the negative effects of foreign exchange movements.

Operating profit for the division increased from R87-million in the prior comparative period to R117-million in the first half of 2013, while revenue also grew from R940-million to R1.09-billion.

A weaker performance by the fleet management and logistics division was chiefly attributed to nonrecurring items, with profit before taxation slumping by 11.5% to R92-million and operating profit remaining flat at R174-million.

“A combination of several negative factors impacted on growth for this business over the period, including the reduced scope of a Clover contract, manufacturing closures, lower interest rates, indirect strike action and leasing asset growth,” Hill explained.

The contract mining and plant rental business posted an operating profit increase of 33% to R246-million on the back of a turnaround strategy in South Africa gaining traction and continued good performance at the Benga project, in Mozambique.

Revenue improved in line with increased volumes and decreased mine-site industrial action on the prior comparative period, while the operating margin improved to 12.2%.

Meanwhile, the construction and mining equipment division was constrained amid challenging operating conditions and a slowdown in the commodity market, which reduced the demand for mining equipment.

While the construction and mining equipment market was presently overstocked and highly price-competitive, Eqstra believed the division was well positioned, as it had low stock levels of new equipment.

The division posted a loss before taxation of R3-million for the period, with revenue dipping from the R163-million achieved for the 2011 half-year to R150-million.

Hill noted that the group’s performance was expected to remain resilient in the near term, with all divisions benefiting from secure long-term contracts and good prospects for increased client penetration from contract renewals.