Gloom follows Scott Corp's bumper year

Mining and retail downturn set to hit company’s bottom line next year after strong profit rise

August 23, 2013

Scott Corporation has been hit on all sides after enjoying a financial year that ended with a hefty rise in profits.

The bulk and dangerous good transporter describes something of a perfect storm swirling around its prospects for the year.

"There has been a noticeable change in market conditions from late July in Australia," Managing Director David Keane says.

"We are witnessing volume reductions across the entire Transport segment, led by manufacturing, mining and retail fuel industry sectors.

"The mining industry has undertaken an aggressive campaign on cost reductions which at times has been matched by lower production outputs.

"Consumers are cautious and are not spending and conditions for some manufacturers are equivalent to those experienced during the Global Financial Crisis.

"We understand our competitors in the transport industry are experiencing the same trends which have brought about a high level of surplus capacity in the sector."

Scott Corporation had driven its annual net profit up 29 per cent to $4.3 million on the back of waste and coal haulage contracts along with lower maintenance costs due to some
equipment upgrades.

But it sees challenges ahead as it awaits the rest of its new trailer rollout to finish and it deals with customer issues.

Costs related to the ageing Southern Bulkhaulage (SBH) trailer fleet, flagged earlier in the year, have proved worse than predicted and the Keane notes that, with a lot of second-had equipment coming on to the market, returns from sales are likely to be relatively minor, even if buyers can be found.

SBH saw volumes fall this July due to production interruptions and its major client decided to build inventory.

"Matters got worse in August when an unplanned decision was made to shut down production at one of the collieries for four to six weeks to address ongoing issues with roof conditions on the long wall," Keane says.

"This has resulted in the cessation of all export coal movements for the month of August."

There has been a 50 per cent fall in its uranium mine acid haulage task in the Northern Territory as mine volumes were downgraded.

Added to this, Scott’s Gladstone branch failed to gain a retendered ammonium nitrate line-haulage contract to South Australia, while its Gladstone export-related contract will cease in October.

While some pin their hopes on a post-election
bounce following, Keane is under no illusions that things will be that simple.

"We find it difficult to predict when business conditions will improve," he says.

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