Howard Smith restructure brings profit turnaround
By 1
TANYA WILLMER
**»»'*** " — NZPA-AAP Sydney Coal and shipping group Howard Smith saw a remarkable turnaround in profit performance in the half year to December 31 as its restructure programme led to improved coal operations and a large reduction in debt.
Chief executive Allan Thompson said the net equity-accounted profit of $20.3 million was a clear improvement on the “disastrous” $5.3 million loss in the previous interim period.
The results reflected the company’s stringent restructure plan and a series of asset sales to focus the company on the four core businesses of coal mining, maritime, distribution, and heavy engineering. However, directors said the improved results “provided a base for confidence, but not complacency.”
Restructuring and costcutting was continuing, and Howard Smith was considering further expansion, most likely in Europe in preparation for the freeing of markets after 1992.
Mr Thompson said the return on coal, which accounts for about 50 per cent of business, was still “totally inadequate,” although the company had yet to see the benefits of the recent work practices award.
Chairman, Sir Neil Currie, said Howard Smith was also concerned about the recent strength of the Australian dollar, with every one cent movement against the U.S. dollar affecting unhedged revenue by about $5 million.
“Quite clearly the rapid increase in the exchange rate has eaten into coal profits ... although the recent diminution of the dollar has helped a bit,”
Sir Neil said. The improved profit was achieved despite a 6.2 per cent fall in sales to $485.4 million, reflecting the sale of its sugar milling interests to Bundaberg Sugar Company, in February last year. In addition, Howard Smith made an extraordinary gain of $24.1 million, mainly from the disposal of assets, including its lighting business. The restructuring also saw debt slashed by about $lO2 million from about $3OO million as at July last year, sending interest expense down to $7.4 million from $16.7 million.
Mr Thompson said Howard Smith’s gearing was down to 38 per cent from 58-59 per cent and the company would be considering expansion, either into a new business in Australia or overseas in one of its core activities. Restructuring of U.K.-
based subsidiary North British Maritime Group was almost complete, and Sir Neil said it could be used as a springboard for acquisitions in the U.K. and Europe,
Howard Smith is continuing cost-cutting at coal mines in the Hunter Valley by the reducing overlap between its operations and those of 49 per cent-owned Coal and Allied. Sir Neil said the company hoped to play a “pivotal role” in the future of the Hunter Valley, although it had no plans to merge wih Coal and Allied.
Mr Thompson said rationalisation of the James Patrick stevedoring and agency operation was also continuing, and although profits were below expectation, “it will be a very profitable and valuable investment to us — but maybe not for 12 months.”
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Press, 1 March 1989, Page 39
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486Howard Smith restructure brings profit turnaround Press, 1 March 1989, Page 39
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