Three-week industrial action reduces Eqstra’s profit

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Johannesburg - Industrial action hurt the earnings of listed leasing and capital equipment company Eqstra in the six months to December last year.

Walter Hill, Eqstra’s chief executive, said yesterday that the three-week countrywide industrial action that targeted members of the SA Federation of Civil Engineering Contractors had reduced earnings. This had particularly hurt the group’s contract mining and plant rental division.

Hill said the turnaround of this division was negatively affected by a R135 million loss in earnings due to this industrial action.

However, Hill said continuing investment Eqstra had made in revenue-generating assets had continued to translate into higher annuity income and operating cash flows.

Eqstra reported an almost 15 percent growth in revenue to R4.94 billion in the six months to December from R4.3bn in the previous corresponding period. Operating profit declined by 13.5 percent to R461m.

Hill attributed this decrease to the industrial action, which had offset the increase in operating profit reported in the fleet management and logistics and industrial equipment divisions.

This translated into a 25 percent reduction in headline earnings a share to 34.9c. Cash generated from operations grew by 27.5 percent to R1.67bn from R1.3bn.

In line with the group’s dividend policy, an interim dividend was not declared.

Commenting on the group’s outlook, Hill said Eqstra’s strategy to remain invested in the UK would benefit earnings as the British economy improved.

The drive to continually improve efficiencies had resulted in ongoing cost reductions that would position the group for an anticipated weaker South African economy.

He said earnings from leasing activities were set to remain defensive and higher interest rates would have a positive impact on earnings.

However, Hill said the mining sector, particularly the Benga project, was expected to remain challenging.

Eqstra operates open-cast coal mining operations at Rio Tinto’s Benga mine project in Tete province in Mozambique on a contractual basis.

Hill said that the Benga project, which was a contract based in US dollars, had performed in line with expectations and the divisional results of the contract mining and plant rental division had benefited from the weaker rand.

Its shares gained 0.58 percent to close at R6.88 yesterday. The JSE’s general industrial index was little changed.


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