Mincon sees revenues fall amid mining industry contraction

Irish engineering group Mincon saw sales fall and its margins narrow in the third quarter of the year amid a contraction in the wider mining sector, particularly in Africa.

In a trading update on Monday, the Dublin-isted company, which specialises in the design, manufacture, sale and servicing of rock-drilling tools and associated products, also said that two large-scale North American projects will “no longer take place as planned” with one of the construction projects pushed back to 2024.

Mincon said group revenues continued to slide in the three months to the end of September and currently 7 per cent below the same period last year.

The decline relates to an ongoing contraction in sales to the mining industry “with a particular weakness in Africa in recent months”, it said. A more competitive mining market also led to a further narrowing of Mincon’s gross margin, which fell to 30.4 per cent in the third quarter from 32 per cent last year.

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“In addition, we had anticipated commencing two large scale construction projects in North America early in Q4 which will no longer take place as planned, albeit the larger of the two will now commence in 2024,” the group said.

Notwithstanding the difficulties, the group said its financial position had improved in the three-month period as it progressed its inventory reduction programme. This, combined with the slowdown in the mining industry, resulted in lower output from its factories, according to the update.

The group now expects to delivering full-year adjusted earnings of around €20 million.

In a note published following the update, analysts from Davy Stockbrokers said the revised forecast is around 27 per cent below current estimates. Shares in the company, which are usually lightly traded, are down more than 18 per cent this year with the stock trading at a 33 per cent discount to the wider sector, analysts said.

In August, Mincon said the first half of its financial year had been challenging period for the group “due to reduced exploration activity” and lower mining activity, forcing it to target cost reductions.

“While the first half of 2023 has been challenging, we are confident that our focus on the efficiency of our production facilities,” said chief executive Joe Purcell at the time, “but, more importantly, the efficient products we have today as well as those in development will ensure that we can grow and thrive in the longer term.”