Mining equipment maker Joy Global Inc. (JOY) Thursday lowered its full year forecast, after profit for the second quarter dropped as sales declined 12 percent from the prior year amid declines in both Original equipment sales and aftermarket sales. The company noted that customers have sharply reduced capex spending in the backdrop of lower expectation for commodity prices.
Mike Sutherlin, CEO, said, ''This quarter again reflected strong execution against continued market headwinds. Revenues were down 12 percent, in line with expectations, and operating profit margin remained strong at nearly 21 percent due to operational efficiencies and cost reduction efforts.''
Net income attributable to Joy Global declined to $181.56 million or $1.69 per share from $213.59 million or $2.00 per share in the previous year.
Excluding unusual items, earnings per share totaled $1.73, while it was $2.23 in the prior-year quarter.
On average, 19 analysts polled by Thomson Reuters expected earnings of $1.56 per share for the quarter. Analysts' estimates typically exclude special items.
Net sales fell to $1.360 billion from $1.541 billion in the prior year. Analysts expected revenues of $1.28 billion for the quarter.
Original equipment sales decreased 16 percent and aftermarket sales declined 8 percent. Changes in foreign exchange rates decreased net sales by $21 million.
Underground Mining Machinery sales dropped more than 23 percent to $681.9 million as Original equipment sales within the business decreased 33 percent driven by a soft U.S. coal market and lower shipments in China and Eurasia.
Surface Mining Equipment sales rose 3 percent to $712.8 million as Original equipment sales increased 9 percent, led by strong sales into South America and Africa.
Bookings decreased over 8 percent to $1.1 billion, but increased 10 percent from the preceding quarter. Underground Mining Machinery bookings grew 7.5 percent in the quarter while Surface Mining Equipment bookings declined nearly 28 percent. Original equipment orders rose 2 percent while aftermarket orders declined 15 percent.
Joy Global said a sluggish recovery in the U.S., lingering economic contraction in the Eurozone and weaker than expected recovery in China continue to slow the growth of global commodity demand.
''...the long term expectation for commodity prices has been lowered and it limits the number of mine expansion projects that can meet updated risk-adjusted return criteria. This combination has significantly reduced customer capex spending. Our analysis indicates that customer capex spend on mining equipment is down 40 to 50 percent,'' Sutherlin added.
According to the company, its aftermarket order rates are recovering and should regain their prior year levels over the next several quarters. However, aftermarket shipping volumes compared to the first half of the year will be limited by the lower beginning backlog. As a result, revenue and profit levels in the second half are expected to be down compared to prior expectations.
The company now expects earnings per share to be between $5.60 and $5.80, down from the previous guidance of $5.75 to $6.35. Excluding restructuring charges, earnings per share are expected to be between $5.75 and $5.95.
Revenues are now estimated to be between $4.9 and $5.0 billion, down from the previous guidance of $4.9 to $5.2 billion.
Analysts look for annual earnings of $6.15 per share on revenues of $5.06 billion.
JOY closed at $55.08 on Wednesday. The stock is down 1.2 percent in pre-market activity.
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