Mining services group Bradken is preparing for a turnaround in the sector as it weighs up a merger proposal following a $240 million loss.
Bradken, which has undergone a major restructure and asset writedowns, has until the end of the month to decide whether to merge with Chilean outfit Magotteaux Group.
The company's revenue has fallen sharply after it merged four of its businesses, closed under-performing manufacturing facilities and recorded writedowns related to a drop in demand.
Managing director Brian Hodges said the restructure of manufacturing was close to completion and had positioned the company to gain volume when the market improves.
"The company's short-term strategy is to focus on growing high margin revenue through market share for consumable products and product development in preparation for an eventual uplift in global mining demand," Mr Hodges said.
He said the foundry in India would contribute to further cost reductions in fiscal 2017.
Bradken, which made a net profit of $21.5 million for the previous corresponding period, said sales revenue dropped 15 per cent to $965.9 million and that it won't pay a dividend.
Underlying earnings before interest, tax, depreciation and amortisation met company guidance at $136.1 million, down 21 per cent on 2013/14.
Bradken revealed in June that it was reviewing a merger proposal from the Magotteaux Group, a supplier of grinding equipment as well as construction and mining services.
Capital expenditure for the year was $56.1 million, down from $57.6 million and net debt has been reduced from $US235 million at June 2014 to $US54 million.
Morningstar Mining Services analyst Ross MacMillan expects the tough times for mining contractors and suppliers to continue for the next 12 months.
"The number one issue for Bradken is whether it will merge with Magotteaux Group," Mr MacMillan said.
"Bradken's had various offers from private equity over the past 12 months and certainly there's merits in the Magotteaux proposal and that's what shareholders will be focused on in the short term."
However, he said in the longer term the company's high level of debt would be a major drag.
He added that Bradken had been forced to taking a $70 million injection of preference shares after asking lenders for an easing of debt covenants.
Bradken and Magotteaux Group have until August 29 to decide whether they will proceed with a merger.
Shares in Bradken closed up 1.5 cents, or 1.35 per cent, to $1.125.
BRADKEN HOPES FOR TURNAROUND AFTER LOSS
* Net loss of $241.3m, compared to a $21.5m profit in 2014/15
* Revenue down 14.9pct to $966m
* no dividend, compared to 11 cents
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