Eqstra Contract Mining Division CEO Justin Colling
Photo by: Duane Daws
JSE-listed Eqstra’s embattled contract mining and plant rental division is showing signs of recovery and is nearly ready to look after itself, the unit’s new CEO Justin Colling said on Tuesday.
The division plunged into turmoil last year, dragging its parent’s overall full-year performance down, amid underperforming contracts, a weak global commodity price environment and a significant exposure to a cyclical mining sector and labour instability.
However, Colling, who assumed the role as head of the division in January, said the division had bounced back during the last half the financial year to June, with indications that it was “taking off” this year and would be ready to “fly” next year.
This followed the termination of lossmaking contracts, operational improvements and renewed labour stability following a three-year wage agreement, besides others, in line with a successfully implemented turnaround strategy.
Further, despite mining capital expenditure decreasing with mining houses demanding alternative solutions, Eqstra moved to offset the loss of revenue by redeploying its excess assets through the leasing or rental of mobile capital equipment.
International Coal Ventures’ (ICV’s) Benga operation, in Mozambique, had cut back its operations to around 70%, with Eqstra taking the opportunity to lease out the idle equipment to nearby Vale’s Moatize mine for 12 months.
The division was seeking similar deals as it negotiated its contract with ICV, which was expiring in December, to either extend the contract or sell the assets to the firm.
Meanwhile, the contract mining unit had secured additional contract mining agreements, with a R3.6-billion five-year contract set to kick off in January.
The division boasted an order book in excess of R11.5-billion by the end of June.
During the year under review, the contract mining and plant rental division posted a 9.3% contraction in revenue to R4.1-billion, while operating profit grew 29% to R308-million.
However, the unit’s loss before tax widened from R24-million in 2014 to R38-million in 2015.