LONDON—Fenner P.L.C. has reported a sharp drop in sales and earnings for its fiscal half-year, as a continuing decline in the mining industry and pressure on sales to the oil and gas sector impacted core businesses.
Revenue for the period through Feb. 29 was about $403.6 million, down from $506.8 million for the same period last year. Underlying profit before taxation dropped by 37 percent to about $11.8 million from $31.8 million in the first half of 2015.
The results marked a continuation of the difficult market conditions of the previous few reporting periods, Fenner CEO Mark Abrahams said, also noting the group's efforts to address the challenges.
“We have now reached a point where our refocusing, restructuring and cost saving programs are substantially mitigating the ongoing volume challenges we are experiencing,” he noted.
The company's restructuring program will, however, continue as it will rationalize its South Africa business, following the recent announcement by customers to close or sell coal mines.
There were also problems at Fenner's Advanced Engineered Products unit, where first-half revenue dropped from $195.4 million to $175.3 million.
This was mainly due to a sharp slowdown in sales to the oil and gas industry. The sector represented 16 percent of the AEP division's turnover in the latest figures, down from 29 percent share in 2015.
Fenner's conveyor belting business, Engineered Conveyor Solutions, posted more than halved to $8.46 million—from $19 million a year ago—as the global mining industry adjusted to lower commodity prices and increased uncertainty over future demand. Revenue for the period dropped to $228.3 million from $299.3 million in 2015.
Australia remained the ECS' strongest region with local production facilities, which allows a shorter order lead-time, and the advantage of weaker Australian dollar which enabled the business to maintain its position in the belt replacement market.
In North America, Fenner launched a major restructuring across its ECS business, closing the majority of one of its two principal belt-making facilities in North America in January.
Fenner said the planned headcount reductions in belt manufacturing facilities were largely completed during this period.
“Our fabricated products business is now located on a single site following the closure of the Allison facility,” the company added.
ECS' order intake from the U.S. coal industry reduced significantly as a result of the ongoing falls in U.S. coal production, financial difficulties of customers as well as continued destocking, the firm said.
“Indeed, the increasingly strained financial position of a number of coal mining groups has led us to withdraw from certain customer relationships with ongoing, tight credit management remaining a key focus,” Fenner said.
In Europe, demand was generally subdued with certain of its markets, such as Russia and Ukraine, remaining very weak.