Profit down 7% at Mincon as Shannon operations severely hit

Operating profit at Irish engineering company Mincon was down 9 per cent during the first six months of the year as the Covid-19 pandemic severely impacted operations at its Shannon plant in the west of Ireland.

The company’s interim report shows it recorded an operating profit of €7.5 million for the six months ended June 30th, 2021, as against €8.3 million in the same period the year before. Gross profit was down 2 per cent to €22.9 million.

The company, which specialises in the design, manufacture, sale and servicing of rock drilling tools and associated products, recorded a 4 per cent rise in revenue to €67 million.

Profit before tax was up 4 per cent to €8 million, while there was growth of 4 per cent in both revenue and profit before tax in despite the pandemic challenges interrupting production in Shannon at the beginning of the year.

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There were also increases in transport costs and lead times during the period, while trading and production continued to strengthen.

At the beginning of the year, including all of January and most of February, the company experienced interruption in manufacturing in some of its plants due to the pandemic.

The largest impact was at its hammer factory in Shannon where capacity was “severely disrupted”, with a 35 per cent reduced manufacturing workforce during those initial months of this year.

This was mostly due to employees deemed to be in close contact with people who tested positive for Covid-19 outside the factory and in the wider community, with the effect being that those employees were instructed to self-isolate in their homes.

The reduced manufacturing workforce in Shannon resulted in the plant producing significantly less product for the company’s customer centres during the period.

This had had a negative impact on Mincon’s gross margin during the first half of the year.

Sea freight costs

However, during March the Covid situation improved in Shannon, and by the second quarter the plant was manufacturing at a much higher monthly run-rate than had been achieved in the past and this “should help to improve gross margin in the second half of the year”.

“At the beginning of this year, when we were impacted hardest due to the pandemic, we were often compelled to use expensive air freight to ensure on-time deliveries to our customers,” the group said.

“During the period, we also incurred sharp increases in raw materials and sea freight costs, and these led to increased pressure on our gross margin during the period. We have passed on the raw material price increases to customers where it is appropriate to do so.

“Our sea freight costs increased considerably during the period as ocean carriers capitalised on the congestion at seaports and overall sea freight market conditions.”

Mincon chief executive Joe Purcell said the company's sales growth during the period "reflected a very strong performance" from a number of regions and industries.

However, this was “offset somewhat” by the continuing impact of the pandemic in two of its regions.

“The European region performed strongly, particularly in the mining and construction industries, while the North American mining industry also performed very well during the period. Australasia, Southern Africa and South America remain impacted by the pandemic,” he said.

“In the case of Australia, in the area of new business developments, there were a number of trials that were curtailed. There were no large-scale construction projects in North America during the period.

“However we have a strong pipeline of tenders and remain positive about the outlook for the industry in the second six months of the year.”