2nd UPDATE: Joy Global CEO Looking To Expand Equipment Lines
June 02 2011 - 1:45PM
Dow Jones News
Joy Global Inc. (JOYG) will continue to look for acquisitions to
fill out its product lines of mining equipment and expand its
production capacity, Chief Executive Mike Sutherlin said
Thursday.
Sutherlin said he's interested in adding hydraulic mining
excavators and underground hard-rock mining machinery. He added
that the company is improving the capabilities of its existing
machines to make them more versatile.
The company last month agreed to acquire LeTourneau Technologies
Inc. from Rowan Cos. (RDC) for $1.1 billion. LeTourneau will give
the Milwaukee company exposure to oil-and gas-drilling equipment
and will expand Joy's line of high-horsepower wheel loaders.
LeTourneau specializes in giant electric-drive wheel loaders for
surface mines. The deal is expected to be completed in the third
quarter.
The LeTourneau deal was widely seen as Joy Global's response to
Caterpillar Inc.'s (CAT) acquisition of mining equipment
manufacturer Bucyrus International Inc. (BUCY). Caterpillar, the
world's largest maker of construction equipment by sales, will have
a significant size advantage over Joy Global once its purchase of
Bucyrus is completed later this year.
Mining companies that shelved mine expansions during the
economic recession have been racing to catch up with the rising
demand for mined commodities, providing Joy Global with the
confidence and profit incentives to make additional
investments.
"We are in the early stages of a multiyear expansion" of mine
capacity, Sutherlin said during a conference call with analysts.
"We're operating with global mine capacity in the mid-90% range.
Our customers are very confident that they need to bring more
[mine] projects on line."
Higher sales and improved margins propelled a 34% increase in
Joy Global's fiscal second-quarter profit. The company topped
analysts' estimates for the quarter and raised its outlook for the
fiscal year. Orders booked for new equipment, replacement parts and
service rose 46% in the quarter from a year earlier.
Second-quarter sales of underground mining equipment rose 19%
from a year earlier to $648.3 million, helped by increased
shipments of equipment to the U.S. coal industry. Operating income
from the underground business rose 42% to $154.9 million.
In the company's surface mining business, sales climbed 15% to
$439.9 million on elevated sales of copper and coal mining
equipment to customers in South America, Australia and Russia.
Operating profit from the business unit rose 9.8% to $101
million.
Joy Global's overall operating margin for the quarter was 22%,
compared with 20.1% a year earlier and 17.6% in the first quarter.
Sutherlin said the company has been able offset rising prices for
raw materials, such as steel, by increasing its equipment prices
and lowering other operational expenses.
For the quarter ended April 29, Joy Global reported a net profit
of $162 million, or $1.52 a share, up from $120.4 million, or $1.15
a share, a year earlier. Revenue jumped 19% to $1.06 billion.
Analysts polled by Thomson Reuters had forecast a per-share profit
of $1.35 on $1.03 billion in revenue.
The company said the weaker value of the U.S. dollar against
other currencies added $22 million to net sales in the second
quarter and added $5 million to operating income.
Joy Global raised current-year earnings per share forecast by 20
cents to $5.30 to $5.60 and boosted its revenue forecast by $100
million to between $4.1 billion and $4.3 billion.
Joy Global's stock was recently up 6% at $91.04 a share.
--By Bob Tita, Dow Jones Newswires; 312-750-4129;
robert.tita@dowjones.com
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