Stronger emerging-market currencies put pressure on Master Drilling’s profits
Master Drilling, a world-leading drilling company, reported a small increase in interim profit as it brought two more raise bore drilling rigs into production during the period.
Revenue for the six months to end-June increased by 12.5% to $60.52m because of the two new drills coming into production. Raise bore drills are used to create large diameter holes between underground tunnels or tunnels and the surface.
However, the cost of sales for the period increased to $37.7m from $32m the year before. 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 CEO Danie 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, which is based in Fochville, Gauteng, 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 increased 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 company, "cutting back on capital projects and scaling back on work already awarded due to the lower copper price environment."
As part of efforts to diversify Master Drilling’s offering, the company has branched out into drilling tunnels for hydroelectric projects and it is nearing the completion of such a project in Colombia. The $2m project "should assist to unlock the hydroelectric energy sector for the company across geographies."
In Brazil, Master Drilling had noticed an increase in hydroelectric projects and it was waiting for feedback on proposals it had submitted in that country.
The uncertainty caused in SA by the regulatory environment coupled with an extended 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.
Master Drilling has a pipeline of projects worth $226m and a committed order book of $225m.
By 9.30am on Tuesday, its share was down 0.07% to R14.89.