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Master Drilling boasts strong order book

Master Drilling CEO Danie Pretorius speaks on the company's prospects. Video and editing: Nicholas Boyd. 22/03/2017

22nd March 2017

By: Megan van Wyngaardt

Creamer Media Contributing Editor Online

     

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JOHANNESBURG (miningweekly.com) – The launch of new projects in the Democratic Republic of Congo, Sierra Leone and Tanzania, paired with increased investment in human resources, has resulted in a 12.1% drop in JSE-listed Master Drilling’s gross profit to $23.5-million for the 2016 financial year.

However, the company noted that conservative provisions for taxation in some jurisdictions in previous years, as well as raising of deferred tax assets on historically lossmaking entities that returned to profitability, have led to a decrease in taxation, supporting a 5.7% increase in profit after taxation to $22.3-million. 

"We delivered a satisfactory performance in 2016 following a difficult first half marked by severe operational and economic issues. As indicated at half-year, the improvement in our operating environment, including in the commodities sector, supported an uplift in overall performance for the year,” CEO Danie Pretorius said in a statement.

He added that a more stable environment was setting in, with the company encouraged by the intensified market activity. “This is highlighted by a committed order book of $196.6-million and our strong pipeline of $320.8-million,” he noted.

Master Drilling’s earnings a share and headline earnings a share rose by 22.1% and 19.4% respectively to 210c apiece.

Net cash generation was lower at $26.5-million, owing to significant investments in working capital, while debtor days increased as a result of longer payment cycles.

"The corrective measures implemented in key markets to support market position and performance are bearing fruit and we will continue to balance investments in technology and people that support growth with the need to drive efficiencies and productivity ratios across the group,” said Pretorius.

"This approach coupled with our diversification strategy across regions, commodities, currencies and industries will see our revenue and margins stabilise further,” he added.

In the year ahead, Master Drilling will continue to set its sights on opportunities in advanced economies such as Australia, Canada and the US.

NEW MARKETS
In the year ahead, Master Drilling will continue to set its sights on opportunities in advanced economies such as Australia, Canada and the US.

"Our diversification strategy across regions, commodities, currencies and industries will see our revenue and margins stabilise further,” Pretorius noted.

Speaking to Mining Weekly Online on the sidelines of the company’s results presentation in Johannesburg, Pretorius further highlighted that its intensified focus on new markets would not necessarily result in Master Drilling’s exit from its poor performing markets.

He explained that, owing to the company’s units being mobile, it was easy to redeploy the machinery elsewhere, if needed.

Further, decisive action had been to introduce new management and operational leadership in Chile to improve the company’s performance in that country, which generates over 15% of the group’s revenue.

New management has also been put in place in Peru following operational issues.

“Our restructuring in Brazil has been completed and is on track to make budget and return to profitability during the current year. Master Drilling was awarded additional hydroelectric power related work in Colombia with equipment being mobilised following the successful completion of an initial contract,” said Pretorius.

In Mexico, silver mining projects are performing well with utilisation rates showing marked improvements and with further contracts in the pipeline.

TECHNOLOGY
Master Drilling expects to introduce new technologies to the market within the medium term, including its horizontal raiseboring technology, which completed a pilot milestone at Petra Diamonds’ Cullinan mine and is driving strong levels of enquiries.

Meanwhile, the company was also in continued talks with the Industrial Development Corporation of South Africa (IDC) for the partial funding of the development of its blind shaft boring and vertical shaft boring systems ahead of planned roll-out in 2019.

“We want to ringfence this new entity and of the R220-million initial capital required, Master Drilling will fund R60-million, with the remainder being the contribution of the IDC, with 35% being converted into equity,” Pretorius pointed out.

Further opportunities to develop homegrown technologies that support cheaper and simpler drilling systems are also being explored with the IDC.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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