Expansion plans: Master Drilling CEO Danie Pretorius says stronger emerging-market currencies during the reporting period had an adverse effect on earnings. Revenue rose 12.5% in the six months to end-June. Picture: ROBERT TSHABALALA
Expansion plans: Master Drilling CEO Danie Pretorius says stronger emerging-market currencies during the reporting period had an adverse effect on earnings. Revenue rose 12.5% in the six months to end-June. Picture: ROBERT TSHABALALA

Master Drilling, a world-leading drilling company, will probably complete a €7m takeover of an underperforming Scandinavian drilling company and buy a Chilean drilling firm to expand its strategic footprint.

JSE-listed Master Drilling reported a small increase in interim profit as it brought two more raise bore drilling rigs into production during the six months to end-June. Interim revenue rose 12.5% to $60.52m because of the deployment of two new raise bore drills. Raise bore drills make large holes between underground tunnels or tunnels and the surface.

Master Drilling CEO Danie Pretorius said, however, this vertical work, accounting for the majority of its earnings, would soon become secondary to horizontal boring to drill tunnels to access ore bodies in a third of the time it takes to reach them using drills and explosives. He said 70% of underground mining was horizontal work, while the majority of the world’s mines were opencast, which was an area in which Master Drilling wanted more exposure.

The Chilean company was a sizeable, privately owned player in that country and would give Master Drilling a competitive advantage in launching itself into the opencast mining drilling arena, Pretorius said.

Scandinavia’s Bergteamet would be encouraged to spread out of its zone of comfort in Sweden, Norway and Finland and start competing in southern Europe, particularly Portugal and Spain, for new business.

Master Drilling’s profit for the six months rose to $10m, from $9.7m and the company did not declare an interim dividend.

"The stronger emerging market currencies during the current reporting period, however, had an adverse impact on earnings," said Pretorius.

Master Drilling has 106 raise bore drills and 33 slim drilling rigs. It expected to maintain its utilisation rate at about 70% for the balance of its financial year and intended pushing this up to the mid-70% range next year. Master Drilling has operations in South, Central and North America and Africa.

Africa overtook South America as the largest source of revenue for Master Drilling during the interim period, generating $27.4m, up from $22m. South America accounted for $26.8m, barely changed from the same time a year earlier.

Africa’s gross profit rose to $13m from $10.6m, while South America, which is dominated by work in the copper industry, saw gross profit slip to $8.6m, from $10m.

The business in Chile was "under pressure" because of Master Drilling’s key client Codelco, the state-owned mining firm, "cutting back on capital projects and scaling back on work awarded due to the lower copper price environment".

The uncertainty caused in SA by the regulatory environment coupled with a downturn in commodity prices, particularly platinum, had resulted in "subdued growth" in its home market and Master Drilling "continues to support loyal clients" during this period, Pretorius said.

seccombea@bdfm.co.za

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