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Austin EngineeringBBY Mining Conference
May 5, 2008
Sydney
About Austin EngineeringListed on ASX in 2004 at 20c; share price now approx. $2.30
National and international designer and manufacturer of mining products
Serves global resources sector from manufacturing operations in Brisbane, Perth, Mackay, Wyoming USA and Oman
Key market penetration in Australia, North America, Canada, South America, Indonesia and Middle East
Employs 600-900 people across the business
Record financial performance in 2006-07; further growth and expansion on an international basis in 2008
World’s largest non-OEM designer and manufacturer of mining dump truck bodies
Austin Engineering – Financial snapshot
Current trading data
Share price $2.30
Shares on issue 46.9m
Market capitalisation $108m
Key 2007 financial data
EBIT $7.31m
Net profit $4.97m
EPS 12.45c
Dividends per share 4c
Payout ratio 25-40%
Board and executive team
Peter Fitch Chairman
Michael Buckland Managing Director
Peter Pursey Non-exec Director
Eugene Fung Non-exec Director
Colin Anderson CFO
Top 5 shareholders
Michael Buckland 5.25%
Thorney Pty Ltd 5.17%
S J Quinlivan Pty Ltd 4.57%
RBC Dexia Investor Services 3.90%
ANZ Nominees Ltd 3.58%
What we makeField-proven across all applications
Offer operational efficiencies for customers
Used by major operators around the world
Quality products, leading designs and branding
Tyre handlers Service vehicles
Excavator buckets up to 35m³ capacityDump truck bodies up to 360 tonnes payload capacity
Austin’s clients and revenue sources Good quality blue-chip,
supportive clients
Clients understand us and we understand them
Motivated to work together to grow
Favourable commercial terms negotiable
Type Client
Miners Rio Tinto, BHP, Xstrata, Macarthur Coal, Anglo Coal, Vale*, Codelco*
OEMs Komatsu, Terex, Liebherr, Hitachi, Hastings Deering
Contractors Leighton, Thiess, Macmahons, Golding Contractors, Downer EDI Mining
Others John Holland, Barclay Mowlem, Aluminium Smelter Operators
*Through licencee relationship in South America
Serving the resources industry with a global presence
Second workshop in Perth, WA opened in Q2 FY 2008, increasing capacity by 65%
Robotic techniques employed in Perth and Brisbane workshops
Austin Mackay expansion completed Q2 FY 2008, new $4m workshop up and running
Locations and capabilitiesLocation Area Serviced Products and Services
Austin, Perth Pilbara, Kalgoorlie, Western Australia, Africa, Indonesia
Dump truck bodies, buckets, service vehicles, tyre handler and materials handling equipment manufacture
Austin, Brisbane Central Queensland coal fields, North Queensland metalifferous ranges, NSW coal fields
Dump truck bodies, buckets, service vehicles and structural steel manufacture
Westech, Wyoming USA
Powder River Coal Basin, North America resources regions, Canadian tar sands
Dump truck bodies, buckets, dragline buckets, deadline anchors and mining products manufacture
Austin, Mackay Central Queensland coal fields, Indonesian mines
Dump truck body assembly, repair and overhaul of mining components and assemblies
Oman, Middle East (joint venture)
Middle East Aluminium smelter components
Cainsa, Chile (licencee)
Chile, Brazil resources regions
Dump truck body manufacture
Client confidence demonstrated by repeat orders
Receiving larger series or runs of orders
Proven track record of delivering quality products
Client needs always a priority
What our clients want – and what we deliver
Client needsDelivery on time to the highest standards of quality
Product reliability
Innovation and custom designs
Operational efficiencies through maximum payloads
Competitive prices, reduced costs
Austin’s solutionsDesign capability and advanced engineering services
Market-leading, proven designs - JEC mining product attachments and Westech dump truck bodies
National and international presence and reach
Modern workshops with advanced manufacturing robotic processes
Emphasis on R&D; more than $1.5m spent since 2004
Building a dump truck body
Robotic welding of floor Assembly of all components
Operating on siteFinished product Delivery to customer
Revenue and NPAT growth secured through higher sector activity and acquisitions
Track record of growth
Improved operational performance secured by increased productivity, automation and higher-margin work
Track record of growth
Improvement in key performance criteria flowing from improved underlying financial performance and business fundamentals
Track record of growth
Strong, positive cash balancesRelatively low ongoing capital expenditure requirementsDebt mostly USD loan to fund Westech purchaseAbility to secure further debt in USDLoan USD-denominated to secure low interest rate and provide natural hedgeWestech debt funding at <4% with opportunity to lock inEBIT/Interest cover >20 at H1 2008Balance sheet capacity to accommodate further acquisitions and growth
Austin’s balance sheet
Dec 07$m
June 07$m
Cash 4.7 6.3
Receivables 18.4 10.2
Inventories 6.8 3.2
Property, plant & equipment 22.7 10.0
Intangible assets 15.7 9.5
Other assets 3.4 1.9
Total assets 71.7 41.1
Payables 18.1 10.6
Interest-bearing liabilities (current) 2.0 6.1
Interest-bearing liabilities (non-current) 23.4 2.7
Current tax liabilities 1.2 1.7
Provisions 2.1 1.4
Net assets/Total equity 24.9 18.6
Operational cashflow benefit from advance progress payments
High emphasis on capital expenditure to expand capacity and improve productivity
Active debt reduction programs funded as far as is possible from operational cashflow
Austin’s cashflow
FY 2004
FY 2005
FY 2006
FY 2007
HY 06/07
HY 07/08
Operating cashflow
1.1 2.4 4.5 3.7 (0.7) 6.3
Investing cashflow
(0.2) (14.0) 15.1 (18.5) (6.3) (25.5)
Financing cashflow
1.0 9.9 (7.7) 9.2 (1.0) 17.5
Industry comparisons
Source: ABN AMRO/ABN AMRO Morgans
Outlook - favourable industry conditions
China, India and SE Asian economies to drive demand for commodities and energy
World steel production to increase 42% and coal trade 25% by 2013 (ABARE)
Increased production to lead mine development, brownfields expansion and repair and replace expenditure
Peru, Chile, Brazil, Argentina and Mexico leading exploration spending in South America; Canada in North America
Iron ore leading growth in Western Australia; infrastructure spending to drive growth in Queensland coal
Commodity prices expected to remain firm for medium term; recent coal contracts set at $US300 per tonne
Budgeted global mineral exploration expenditure forecast up 25% at $US13.1bn in 2008 (Metals Economics Group)
Firm commodity prices
Spotlight on Canadian Tar Sands
Canada has one of the world’s largest deposits of tar sands
At least 1.7 trillion barrels in the Athabasca oil sands deposit
Improved technology emerging to make extraction more economically viable
Number of expansion projects under consideration or underway
Westech well positioned geographically and has the capacity to serve the region
Westech and JEC product range expansion possible in the region
Spotlight on Central Qld Coal Fields
Coal companies positioning themselves for further export growth
Qld government has reported 28 advanced coal projects in central Queensland, comprising 17 new mines and 11 expansions
Estimated expenditure of $11.5bn on coal projects to 2013
$9bn earmarked for coal transport infrastructure
Dalrymple Bay coal terminal expanded to 65m tonnes annual capacity, plans to expand to 85m tonnes by end of 2008
Government to expand Abbot Point coal terminal
Austin well positioned to take advantage of demand for manufacture, assembly and repair of Westech, JEC and other products
Spotlight on Western Australia Iron Ore Region
Vast expansion programs underway
Sound economic fundamentals, more iron ore producers entering into the market
Long-term outlook being adopted by OEMs, closely following long-term outlook by major miners
High activity = high levels of demand for new and replacement mining equipment
Product delivery, reliability and operational efficiency are keycustomer requirements
Austin well-positioned to consolidate and expand its position in the region - ability to meet customer requirements well recognised and acknowledged through repeat business
Austin’s strategyOperational
Growth and diversification through acquisition, expanding manufacturing
Target high-growth oil, iron ore and coal markets; Canada, South America and Australia
Establish additional overseas operations in new markets, e.g. oil and gas
Employ technology to further reduce costs, increase output
Acquire new product lines
Shareholder returnsConsistent, reliable underlying profit growth
Increasing dividends
Capital appreciation
FY 2008 in reviewPerth and Brisbane workshops operating at full capacity
Continuing to receive strong flow of orders, extending into 2H 2008-09
Westech performing to expectations, solid forward workload for manufacturing operations
Effective and growing market penetration of Westech bodies in established and developing markets
Westech licencee Cainsa (Chile) secured major order to build large series of dump truck bodies for major mining house
Second phase of order to be signed in next few weeks
Westech licence fees now a recurring source of revenue
Record results for 1H 2008, EBIT up 110% to $7m and NPAT up 100% to $4.7m
Queensland floods and associated transport restrictions resultedin three months of lost contribution for Kaldura workshop in Mackay; Austbore also affected but to a much lesser extent
Transport restrictions now lifted; Kaldura back to full capacity for April to June 2008 in new expanded workshop
2H 2007-08 EBIT forecast to be stronger than 1H 2007-08
Austin’s outlookRecord work in hand with orders into 2008-09
No sign US economic slow down having an impact on mining regions
Resources sector to remain strong for both new projects and repair and replace
Financial capacity to pursue further acquisitions
To expand Westech product range in South America and Canada
India and other emerging economies offer opportunities for product expansion
Follow-on projects in Middle East
Boost from expanded Kaldura operation, Mackay
Forecasting strong increases in all key financial measures for FY 2007-08
Further business expansion opportunities being considered
Share buy-back scheme to be considered
