Mincon grows revenue 11% despite supply chain issues

Irish engineering company Mincon grew revenue by 11 per cent last year despite significant supply chain challenges.

The company specialises in the design, manufacture, sale and servicing of rock drilling tools.

The group said it achieved revenue growth during the year across all industries, with the strongest growth observable in the mining industry where organic revenue grew by 16 per cent.

“We had fewer large construction supply contracts in 2021 versus 2020. However we achieved growth in smaller supply contracts in Europe and the Americas which drove overall revenue growth in the construction industry of 7 per cent,” it said.

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The areas of procurement and logistics “presented challenges” during the period in terms of material availability, raw material price increases, higher freight costs and longer transit times. For example, trans-ocean freight transit times roughly doubled in 2021.

“As a result we chose to increase inventory levels of both raw materials and finished goods to ensure we maintain continued strong service to our customers who use our products for business-critical operations,” it said.

“Supply chain challenges and increases in raw material prices had an impact on our margins during the year, along with additional operational costs brought about by the ongoing pandemic. For instance, our overall manufacturing freight cost increased by 18 per cent.

“We were also compelled to purchase local non-Mincon products to fulfil our customer requirements when Mincon manufactured products were subject to freight interruptions at seaports, and this also impacted our gross margin in 2021.

“We have passed on price increases to customers to offset increases in manufacturing and delivery costs, but only when it was considered appropriate to do so. Despite these challenges we were able to maintain profit growth and finished the year 1.4 per cent ahead of prior year profit after tax.”

Profitability

It said it was keeping the Covid-19 situation “under review”, but provided the global situation continued in the current positive direction it intends to ease restrictions on travel.

Mincon recommended the payment of a full-year dividend for the year ended December 31st, 2021, in the amount of 1.05c per ordinary share.

The group's chief executive Joe Purcell said: "We are very pleased to report growth in revenue and profitability in 2021, following what was another year characterised by challenging and uncertain market conditions due to the Covid-19 pandemic.

“The start of the year was particularly challenging due to the impact of the pandemic, but we worked hard to mitigate the impact by adapting our operations to suit the variable conditions.

“While strict Covid-19 health measures remained in place through the year in some areas, such as western Australia, we still delivered a strong performance for the year, particularly in the second half where gross profits rose 16 per cent year-on-year.”

An analyst with Davy said the results were “in line with our expectations” and had been achieved “despite significant cost and supply chain challenges, with the company seeing a particularly robust level of activity in the fourth quarter”.

“We are confident that our expectations for significant growth in profits (circa 13 per cent) in 2022 are achievable and retain our ‘outperform’ rating,” he said.