Mincon posts 30% rise in pretax profit

Profit before tax at Irish engineering group Mincon posted a 30 per cent year-on-year rise in its pretax profit to €8.1 million during the first six months of 2018.

The company, which specialises in the design, manufacture, sale and servicing of rock-drilling tools and associated products, announced its half-year results for the six months ending on June 30th on Monday.

The Shannon-based company designed and manufactured the drill that secured access to 33 trapped Chilean miners in 2010.

Revenue at the company rose 19 per cent to €55.7 million, while gross profit climbed 20 per cent to €22 million, and operating profit swelled 19 per cent to €8.1 million. Earnings per share rose by 21 per cent to 2.91 cent.

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Mincon chief executive Joe Purcell said the goal of the company was to deliver "sustainable earnings".

“We continue to build a coherent, complementary product range of consumables to address the surface drilling needs of the mining, geothermal, water well, piling and construction subsectors,” he said.

“We are on a path to remove third-party sales from our line-up where that makes commercial sense, to either manufacture them in our own plants or discontinue the sales.

“The gross margin percentage on manufactured products is higher and is a more significant driver of our earnings. This is particularly true where the engineering value add is significant.

“Our goal is not revenue growth for its own sake, but sustainable earnings growth, and niche manufacturing to develop defendable intellectual property that underwrites our margins over time.

“We work to build long-term sustainable, defensible market positions by offering value for money rather than price as our central proposition. We see better engineering as core to our product offering.”

In terms of capital investment, Mincon said it reduced the emphasis on acquisitions two years ago as value was “driven out by aggressive bidding”.

“Instead, we made significant decisions to invest in a three-year rolling capital investment programme,” it said.

“We are now substantially through that investment plan, having approved some €18 million, 400 per cent of our depreciation rate, in the 18-month period.”

Capital expenditure

It added that capital expenditure commitments would slow during the second half of the year and beyond as current factory build-outs are completed and the plant and machinery it has purchased is commissioned and brought into the production process.

The board of Mincon recommended the payment of an interim dividend of 1.05 cent per ordinary share, which will be paid to shareholders on September 25th.

In terms of outlook, the company highlighted business “uncertainties” such as Brexit and a trade war.

“The potential impacts from trade wars, tariffs and the UK leaving the EU are business uncertainties, but at present we are considering those impacts to be neutral,” it said.

“While we stay alert to the context of our businesses, products and markets, our planning is long term, considered and based around long-term objectives.”

An analyst with Davy said Mincon was now seeing “significant margin expansion” after experiencing extensive revenue growth in the past couple of years.

“Underlying operating profit margin is up by more than 200 basis points year on year,” he said. “Risks to estimates continue to look firmly to the upside, and the Greenhammer system has the potential to add significant earnings from 2019.”