By Dow Jones Business News, February 27, 2013, 03:31:00 PM EDT
--Joy Global affirms earlier fiscal 2013 guidance
--Fiscal first-quarter orders bookings down 28.5% from a year earlier
--Joy says demand for mined commodities is stabilizing
(Updates with comments from CEO and analyst and more details throughout about market conditions and the performance of
By Bob Tita
Mining equipment maker Joy Global Inc. ( JOY ) said it doesn't expect improving demand for mined commodities to drive up
near-term sales of its equipment.
The company's fiscal first-quarter results topped expectations, despite flat income with a year ago and sales that
rose just 1.2%. Markets for copper, coal, iron ore and other commodities slumped throughout 2012, but have been
stabilizing lately. Joy Global executives cautioned that the strength behind the rebound remains tenuous. The Milwaukee
company said mine operators appear content to allow rising demand to shrink inventories of commodities and let higher
prices gain momentum before considering mine expansions or additional equipment purchases.
"We are seeing some encouraging, but early, signs of markets improving, but the impact on us is likely to be on the
horizon, than around the corner," said Chief Executive Mike Sutherlin during remarks to analysts on a conference call
CEOs for several major mining companies have lost their jobs in recent months after skidding commodity prices
undermined expensive mine expansion projects initiated when prices surged from increasing commodity consumption by China
and other developing economies.
"High-risk, high-return projects are out in favor of predictable returns," Mr. Sutherlin said.
Joy's fiscal first-quarter orders--a key indictor for future sales--dropped 28.5% from a year earlier to $1.02 billion
and fell 22.4% from the end of the fiscal fourth quarter on Oct. 26. The company said its expects some improvement in
orders in the coming months, but added that base orders, which don't included major mine projects, will likely be flat
throughout the year.
Some analysts expect sluggish demand for Joy's equipment to persist into 2014.
"It feels like we have another year ahead of us" said Joel Tiss, an analyst for BMO Capital Markets. "This is a slow-
moving business. You'd have to place a huge amount of orders today to change the direction of 2014's sales numbers."
Milwaukee-based Joy Global has tried to counter falling equipment sales with cost-reduction measures to boost margins.
The company's operating margin for the quarter, excluding special items, improved to 19% from 18.8% a year earlier.
Sales of new underground mining equipment and replacement parts decreased 7.7% from a year earlier, but operating
income from the underground unit rose 18.4%. Sales of new surface mining machinery and parts climbed 13.7%, while income
Company executives moved to dispel lingering speculation by investors that the company is facing accounting problems
at its International Mining Machinery subsidiary in China similar to those alleged last month by rival Caterpillar Inc.
( CAT ) at its ERA Mining Machinery Ltd. in China. Caterpillar disclosed a write-down on ERA equivalent to more than 80%
of the purchase price for the company.
"We believe the internal and external financial and operational audits and business reviews performed at [
International Mining] before, during and subsequent to our acquisition provide a high level of comfort that the reported
results are accurate," said Chief Financial Officer James Sullivan.
Joy Global acquired International Mining in late 2011 for $1.4 billion to increase its penetration of the Chinese coal
mining machinery market. During the first quarter, IMM earned $10.3 million on $57.5 million of sales, after reporting a
$2 million operating loss in the fourth quarter on $52 million in sales.
Overall, for the quarter ended Jan. 25, Joy Global reported income of $142.1 million versus a year-earlier profit of $
142.4 million. Per-share earnings were flat at $1.33. Profit was squeezed by a 16% increase in the company's income-tax
provision to $63.9 million. Revenue increased to $1.15 billion from $1.14 billion a year ago.
Analysts polled by Thomson Reuters had expected earnings of $1.14 a share on revenue of $1.08 billion.
Joy was recently up 6% at $63.53 a share.
--Saabira Chaudhuri contributed to this article
Write to Bob Tita at firstname.lastname@example.org
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