Master Drilling puts tough year behind it
The drilling services provider sticks to its dividend payments despite a challenging year and reduced net cash generation
Master Drilling has reported flat profits for 2018, a year that was more difficult than management had expected, but it maintained its annual dividend.
The group, which is based in Fochville, Gauteng, is one of the world’s largest drilling companies, with a fleet of 149 raise bore machines and 30 slim line drills. Raise borers are used to develop vertical tunnels between underground working areas in mines or from the surface to underground areas.
Master Drilling reported post-tax profit of $17.47m for the year to end-December, compared to $17.45m the previous year, despite a 14% increase in revenue to $139m.
The company declared a dividend of R0.26 per share, the same as the year before.
Net cash generation from its activities in South America, Africa, India and Europe dropped to $26m from $33m the year before.
Master Drilling CE Danie Pretorius spoke to Business Day TV about their latest results and where growth is going to come from moving forward.
“This is as a result of the worsening working capital cycle which came on the back of slower payment from debtors due to challenging global economic conditions,” said CEO Danie Pretorius.
“Over the past year, the macroeconomic operating environment proved to be more difficult than initially anticipated, both globally and domestically,” he said.
Debt grew to $60m from $44m during the year as the company expanded by completing the takeover of Bergteamet Raiseboring Europe in Scandinavia and Atlantis Group in SA as well as adding five new raise-bore machines to its fleet.
The addition of the Atlantis business increased Master Drilling’s exposure to India, where it already has a contract with Vedanta, as well as Brazil and Zambia.
Master Drilling will soon start a pilot project in SA for its mobile tunnel-boring machine, an innovative piece of equipment that it had designed, built and tested in Italy by a company it took over in 2018. The hope is for the pilot project to evolve into an extended contract.
Master Drilling had a committed order book of $204m by the end of December and a pipeline of potential orders of nearly $579m.
This was a vast improvement over the $125m order book by the end of 2017 and a pipeline of $228m.
“Diversification across regions, commodities, currencies and industries remains a key part of our long-term strategy,” said Pretorius.
“We are experiencing strong demand with increased inquiries across the various regions and commodities and expect this to continue,” he said, adding that the company was “cautiously optimistic” about the prospects for the year ahead.