MACMAHON HOLDINGS LIMITED
MAH - Macmahon Holdings 2008 Full Year Results - Mr Nick Bowen, CEO and Mr Ross Carroll, CFO
Wed, 20 Aug 2008 10:00AM
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Mr Nick Bowen and Mr Ross Carroll
Wed, 20 Aug 2008
10:00AM Australia/NSW
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MACMAHON HOLDINGS LIMITED (MAH)
ASX code: MAH
Website: http://www.macmahon.com.au/
Industry: Capital Goods
Principal Activities:
Contract mining, civil engineering and quarrying.
Address:
263 Adelaide Terrace, Durack House, Level 3
PERTH
WA
Phone: (08) 9365 1111
Fax: (08) 9325 4058
Executives & Directors
Mr Richard J Carter , Chairman, Director
Mr N Bowen , Managing Director, CEO
Mr Barry Cusack , Director
Mr Malcolm Kinnaird AO , Director
Mr Barry Ford , Director
Mr John Massey , Director
Mr Vyril Vella , Director
Mr Ross Carroll , CFO
Ms Katina Gunellas , Company Secretary
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Company ASX Announcements
Company ASX announcements can be viewed on the ASX website.
Announcements from the preceding six months are shown below.
Please refer to the relevant stock exchange if any of the above information is incorrect
MACMAHON HOLDINGS LIMITED (MAH) Events
| Company (Stock Code) | Date/Time | Event | Timezone: Australia/NSW |
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Fri, 7 Nov 2008 12:00PM |
MAH - 2008 Annual General Meeting - Mr Nick Bowen, Managing Director, CEO |
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Wed, 20 Aug 2008 10:00AM |
MAH - Macmahon Holdings 2008 Full Year Results - Mr Nick Bowen, CEO and Mr Ross Carroll, CFO |
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Wed, 16 Apr 2008 02:30PM |
MAH - Queensland Rail Additional Work - Mr Ross Carroll, Chief Financial Officer |
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Wed, 20 Feb 2008 11:00AM |
MAH - 2008 Half Year Results - Mr Nick Bowen, CEO and Mr Ross Carroll, CFO |
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Fri, 9 Nov 2007 06:00PM |
MAH - 2007 Annual General Meeting - Mr Richard Carter, Chairman & Mr Nick Bowen, CEO |
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Tue, 21 Aug 2007 10:00AM 10:00AM Australia/WA |
MAH - 2007 Full Year Results - Mr Nick Bowen, CEO |
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Mon, 13 Nov 2006 02:00PM |
MAH - Annual General Meeting - Mr Richard Carter, Chairman and Mr Nick Bowen, CEO |
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Mon, 21 Aug 2006 04:10PM |
MAH - Full Year Results for 2006 - Mr Nick Bowen, Managing Director, CEO and Mr Rick Blair, CFO |
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| Fri, 7 Nov 2008 01:00PM 01:00PM Australia/WA |
Annual General Meeting The Sheraton Perth Hotel, 207 Adelaide Terrace, Perth, WA
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| Fri, 10 Oct 2008 | Date Payable | ||
| Fri, 12 Sep 2008 | Record Date | ||
| Mon, 8 Sep 2008 | Ex Div Date | ||
| Wed, 20 Aug 2008 | Full Year Results | ||
| Fri, 4 Apr 2008 | Date Payable | ||
| Thu, 20 Mar 2008 | Record Date | ||
| Fri, 14 Mar 2008 | Ex Div Date | ||
| Wed, 20 Feb 2008 | Interim Results | ||
| Fri, 9 Nov 2007 10:00AM |
Annual General Meeting Hyatt Regency, 99 Adelaide Terrace Perth WA
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| Tue, 9 Oct 2007 | Date Payable | ||
| Tue, 11 Sep 2007 | Record Date | ||
| Tue, 4 Sep 2007 | Ex Div Date | ||
| Tue, 21 Aug 2007 | Full Year Results | ||
| Wed, 4 Apr 2007 | Date Payable | ||
| Wed, 21 Mar 2007 | Record Date | ||
| Thu, 15 Mar 2007 | Ex Div Date | ||
| Tue, 20 Feb 2007 | Interim Results | ||
| Fri, 10 Nov 2006 10:00AM |
Annual General Meeting The Hyatt Regency Hotel, 99 Adelaide Terrace Perth WA
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| Mon, 9 Oct 2006 | Date Payable | ||
  Displaying 1-20 of 35 events
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MACMAHON HOLDINGS LIMITED (MAH)
| Awarded Pilbara Construction Contract | Mon, 1 Dec 2008 |
| Response to media speculation | Thu, 27 Nov 2008 |
| Sydney Rail Project | Fri, 21 Nov 2008 |
| Awarded $89 million Darwin Road Contract | Thu, 20 Nov 2008 |
| Change of Director`s Interest Notice | Tue, 18 Nov 2008 |
| Appendix 3Y | Thu, 13 Nov 2008 |
| 2008 AGM Chairman`s Address | Fri, 7 Nov 2008 |
| Ceasing to be a substantial holder | Fri, 7 Nov 2008 |
| 2008 AGM Slide Presentation | Fri, 7 Nov 2008 |
| Results of 2008 Annual General Meeting | Fri, 7 Nov 2008 |
Please note: This company appears on this website as a result of its listing on the Australian Securities Exchange. Boardroom Radio does not claim any association with any company listed on this site.
NICK BOWEN, CHIEF EXECUTIVE OFFICER, AND ROSS CARROLL, CHIEF FINANCE OFFICER OF MACMAHON HOLDINGS LIMITED (MAH)
“2008 Full Year Results”
http://www.brr.com.au/event/49364
WEDNESDAY, August 20, 2008, 10:00 AM.
MAH Thank you and good morning and welcome to our shareholders, employees, and analysts that are on the line.
10
The plan this morning is that I’ll begin by sort of giving an overview covering some of the highlights. I’ll then hand over to Ross who’ll go through the financials and he’ll flick back to me and I’ll sort of wrap up with progress going forward.
15
As we run through the slides, we’ll mention the slide number each time; it’s in the bottom right-hand corner so you can keep track of us. We’ll try and wrap the actual presentation up in about 40 minutes which will leave 15 or 20 minutes for questions. We want to wrap the whole thing up by 11 o’clock and
20 look at -- so it’s a fairly large slide pack. So some of the slides are fairly self-explanatory and we’ll probably flick through those very quickly.
So I’m starting on Slide 3 with the -- hitting up the top record performance and certainly the high level we think the results outstanding. We’ve now delivered
25 seven years of continuous improvement in our financial results and this year is a record in our 45-year history.
On the revenue line, it was a record 1.25 billion and we’ve also delivered a record profit after tax of almost 49 million. I think the key point to note with the
30 financials is that significant increase in profit has come without the need to raise additional equity. And in fact if you look at it, there’s almost a direct correlation between the growth in our profits and the growth in earnings per share which is a key driver for us.
35 Also, you know, a recognition of our improved performance. We’ve delivered a significantly dividend and the total dividend for the year is 5.5 cents per share which is 93% increase on last year. And the last sort of financial measure is the order book which is also at a record of almost 2.2 billion.
40 So overall, we think, you know, an excellent set of numbers, you know, following a very good year across the company.
Moving on to Slide 4, which just covers some of the key performance indicators for the business, if I just run down those. I mean, the first was that
45 we obviously want to meet our financial targets. We’ve been saying all year long that we would deliver something like a 40% profit growth. We have delivered plus 45%, and from our view of it, we’d exceeded all market expectations with the profit numbers.
In terms of the business, we had a plan to win a significant number of contract extensions and through the year we’ve picked up over 500 million worth of contract extensions, and probably most importantly there, every contract that’s come up for renewal, we’ve been able to renegotiate. So we
5 haven’t lost any of their existing work.
We also had a big focus this year to expand our presence in the coal area and we’ve done that by winning some more coal contracts and also we’ve picked up some additional work for Queensland Rail. So that’s by an
10 excellent outcome for us.
In terms of delivering per shareholders, we think the 30% plus total shareholder returns for the year is a very good outcome, especially considering market conditions. Again, considering where everything is at the
15 moment. The strength of our balance sheet, and as Ross will cover later, the low gearing levels really positions us very well for growth. And probably the only flat area for the year has been our safety performance which I’ll cover next.
20 So moving on to Slide 6, so jump one and go straight to Slide 6. Covering off on our group employee numbers and our group safety performance. And certainly, our people are our single most important asset. It’s their talents and skills which is driving the success of MacMahon.
25 As you can see from the graph on the left there, despite the current labor challenges across Australia, we’ve continued to increase our workforce numbers and we’ve added something like 500 new employees to the group over the past year and our workforce numbers currently stand just in excess of 3,600.
30
Certainly across the group, we’ve got a number of innovative strategies and initiatives in place to ensure we not only maintain sufficient numbers for our current growth plans but we’re also building for our future needs.
35 The past year has certainly seen a very high influx of new workers to the company, and as with all new employees, we’re very focused on training and that’s particularly important as we are now sourcing workers from industries outside of mining and constructions. So we’re having to bring new people in.
40 And that’s probably the one big challenge for us in that as we brought new people in, we actually have unfortunately seen our safety performance leveled out. It’s not deteriorating, it’s just levelled out. And our total recordable injury frequency rate which is the number of recordable injuries per million man-hours worked has flattened out of 12.9 and although it’s not an
45 improvement on 2007, it’s still certainly top quartile industry performance.
We’re certainly confident though that going forward with our focus on more training and additional safety programs that we can continue to deliver improvement in our safety performance.
So after covering those couple of highlights, I’ll now hand over to Ross who’ll go through the financial suite.
5 MAH Thanks, Nick.
We’re on Slide 8 everybody. Financially, we’ve had another stellar year as Nick’s stated.
10 Revenues up almost 29% to 1.24 billion. EBIT is growing 25% which is large and long with the revenue growth. Net interest expense has decreased as a result of debt levels and I’ll talk about that a bit more later on.
And inline with having tax earnings, increased earnings, tax expenses
15 increased. So the effective tax rate has decreased to 26.5%, down from 31.3% last year. The reductions are due to research and development tax concessions and some previously unrecognized income tax losses relating to our overseas operations which we’ve been able to utilize.
20 In 2009, we may see effective tax rate to be in the range of 28% to 29%. Profit of $48.8 million is slightly above market expectations and we’ve managed to improve our NPAT margin from 3.5% to 3.9%.
Now, as Nick has already mentioned, we’ve had large increases in earnings
25 per share and dividends per share which is obviously very pleasing. And finally, we’ve managed to increase our profitability while reducing our capital requirements which is a result of an increase in return on equity up to 98.4%. So we’re obviously very pleased about that.
30 Moving to Slide 9, (inaudible) (00:07:05) it’s reasonably self-explanatory that you see from this graph that construction has been the star performer with a big increase in volume of work and also our margins. Pleasingly, this has come with a very large capital expansion of around $5 million for the year.
35 Mining has had a solid year with a small increase in volume, it was partially offset by lower margins. And moving to the right, you can see that we’ve removed the impact of Allplant which is sold last year so that’s deducted about 5.4 million of EBIT from the group’s results.
40 And now as we also seek to increase the organization’s capability, corporation costs have increased. Now these costs have been impacted by higher rent, higher IT, and higher salary cost. That’s really a necessary part of us growing to a bigger and better company.
45 You can see the impact of interest from tax which was covered on the previous slides. Following is minority interests. These have increased in line with the improved performance of our 60% earnings subsidiary in DM Rail.
Now moving to Slide 10, which covers revenue and EBIT margin growth. As I mentioned earlier, revenues increased to 1.244 billion and as far as the compound annual growth rate, it stands at 24%.
5 Now, this shows a continuing improvement on our operating performance and a growth of the company at that time. EBIT margins going along with expectations at 6% despite increased industry-wide cost pressures and some minor impacts to our mining business which I’ll talk a bit about later.
10 Now we expect margins to continue at similar levels in the future. However, with the business moving towards operating and leasing for the majority of their equipment financing, EBIT margins will become a less meaningful caveat. Now as a result, we will focus on impact margins moving forward.
15 Moving across to Slide 11, as mentioned earlier, profit has grown to $48.8 million which is a 46% increase on the underlying results of 33.4 million last year, and importantly, this growth having come with the expansive margin and the margins have grown from 3.5% up to 3.9%. Now, perhaps in the operating performance, this has been aided by the reduced interest payments
20 and lower effective tax rate. And moving forward, we expect margins to stabilize at around about 4% in the future.
Slide 12 covers cash flow. I think pleasingly, as well as the improved profit performance, cash from operations has increased significantly during the year
25 up to 88.7 million which is an improvement from the 68.7 million recorded last year. And this occurred again due to higher profitability and lower interest finance offset by increased tax finance.
Turning on the graph here, growth from investment capital totalled 47 million
30 for the year with an additional 22.2 million of equipment finance operating those facility. Now the majority of this expansion was on equipment to mining projects including the project startup at Saraji. Importantly, operating cash flow has increased by nearly 27%. We’ve got a 129 million of cash at hand at the end of the year. So strong position in cash flow for us.
35
Slide 13 covers on gearing and debt and the balance sheet generally. Balance sheet management is an area that the company has been extremely focused on over the last two years. And given the current state of debt and equity markets, we’re very pleased with where we’re at. The balance sheet is
40 in a strong position. The company is gearing in a new lower 11.6%. This compares to 25.9% of June last year and 18.8% at the half year just gone. So there’s strong and continued improvement there.
The lower debt level is an increased cash from operations that resulted in an
45 increased coverage, almost doubling from 5.4 times at June 2007 up to 9.9 times the current year. This strong and constantly improving balance sheet demonstrates the company’s ability to grow the business organically without the need to raise additional equity on materially increased dent levels.
Construction business has been a crucial element of this balance sheet strength. There’s only a (inaudible) (00:11:23) as some of our peers have focused purely in the more capital intensive mining activities. Overall, this leads the company ideally placed to future organic growth, potential
5 acquisitions or returning excess funds for shareholders.
Now moving to Slide 14 which covers the EPS and DPS and return on equity. I don’t think I really need to talk too much here. But the EPS has been in line with profit growth which demonstrates the company’s ability to grow without
10 raising additional equity and diluting shareholder returns. I guess, the shareholders will be very happy to see that dividends are up by 83% to 5.5 cents per share and this is a far cry from the 0.5 cent per share price back in 2004. Now the 5.5 cents per share represents a payout ratio just under 60% and as I mentioned earlier, return on equities improved to 98.4% which has
15 been a major focus for the group.
Moving on to Slide 15, continue with the measures of shareholder returns. This slide shows the MacMahon PSR performance of one year and five years compared to FPs. And as you can see, MacMahon has significantly
20 performed almost all FPs of about the short and extended period of time. Total shareholder returns are a much critical performance measure and we’re going to continually strive to be a long-term investment of choice for our shareholders.
25 Moving to Slide 16, we’ll look at the business units now starting with the construction business. Construction business is built on an excellent first half performance delivering 628 million of revenue for the year, up actually 56% from 2007. Revenue growth was underpinned by ongoing federal and state government investments in infrastructure. And the business is also benefiting
30 from numerous resource infrastructure contracts and offer in WA’s Pilbara region as a result of BHP Billiton and Rio Tinto’s rapid expansion plans in both their iron ore businesses.
The EBIT was up a very impressive 138.1% to $38.1 million. The margins
35 have increased by 53.5%, up from 4% last year to 6.1% this year. These margin results are attributable to a successful and profitable completion of a number of contracts.
Now additionally, the business has continued to focus on growing its market
40 share in a booming infrastructure states of WA in Queensland. The east coast of Australia remains an important focus with several key projects including the Logan River Catchment and the Jilalan Rail Yard upgrade commencing during the year.
45 Now despite the prevailing tight labor market conditions, the construction business has been able to grow its employee numbers by almost 40% ensuring growth is not hampered by labor constraints.
Now to Slide 17, the mining business has experienced solid growth through the year with revenue up by 10.2% to 616.4 million. EBITDA has increased by 7.5% when compared to the comparative period. Now mining margins were 8.8%, slightly down than the previous year.
5
Next slide, the half year results, margins were affected by the unusually heavy rain in Queensland and production constraints at the Eaglefield project in the Bowen Basin. Importantly, though, mining margins showed a significant improvement from the first half of 2008 that we recorded a 7.5% margin with
10 second-half margins being approximately 10%. So it’s very pleasing to see the improvement in the business during the second half. CAPEX was down on the prior period with lower CAPEX requirements and the effective equipment being financed by our operating lease facility. And the order book stands at 1.1 billion which is up 8.4%, but excludes the $1.1 billion Moly
15 Mines contract which is still subject to Moly obtaining their own project financing.
So I now hand it back to Nick to talk about the order books.
20 MAH Yeah, thanks, Ross.
I will just skip over Slide 18 and move on to Slide 19 so we can keep this all going.
25 So just in terms of the work we won in the year, I think the important point to take away here is that not only did we secure new contracts worth 800 million, but as I mentioned earlier, we also extended contracts with a total value of about 570 million. And as I said, we were successful in renewing every single contract that came up for an extension during the year. And this does
30 highlight one of our major strengths which is our relationship with our customers and our ability to partner with them to deliver long-term outcomes on projects.
If you look across to different contracts, the sort of big wins for the year, if I
35 take them by region, up in the Pilbara, we won the Newman Hub and the Satellite Orebody Rail contract for BHP Billiton. And nearby for Rio Tinto, we picked up the Merseyrail and more work at both the Dampier and Cape Lambert ports. And if you add all that work up in the Pilbara, I think we won some 200 million of new work during the year.
40
The other very important area for us was crossing Queensland in the Bowen Basin. We picked up two new coal contracts both with BMA which is BHP Billiton Mitsubishi Alliance at the Saraji and at the Goonyella mines. And in addition to that, we were successful in adding a very significant expansion to
45 our alliance with Queensland Rail. So, not only do we now have the Jilalan Rail Yard but we’ve also won the Goonyella to have a point extension project. So very significant wins up there in the coal.
Our mining business was also successful on winning a couple of more new projects. We won the Szklary Nickel Project for XStrata which gives us some more work with them. And up in Asia, we won a new contract for Lafarge down in Indonesia. So that’s our second contract with them. And all up
5 through the year, new contracts and contract extensions totalled about 1.4 billion which we’re pretty happy with.
Across on Slide 20 which is just showing the buildup in the order book and the run-off for the next few years, I don’t need to dwell on it too much, but the
10 total order book is just below 2.2 billion at the moment. As it has been the case to date, we have not yet included the $1.1 billion Moly Mines Spinfex Ridge contract in our order book. We’ll wait until they complete project financing before we bring that on.
15 And in terms of the order book run-off, we’ve already got 1.2 billion of revenue locked away for 2009 which is a very strong position for us. In addition, we’d expect to add about 100 million of work in 2009 from contract extensions. So in reality, the secured at work is more like 1.3 billion already, which is putting us on track to deliver further growth in the 2009 year.
20
Moving over to Slide 29 which gives a couple of pie charts which breaks up the order book, bottom left-hand corner which is probably the one that’s most important for us, we’ve maintained a very high quality of our customer base with the combination of governments around Australia, BHP Billiton and Rio
25 Tinto now accounting for 75% of that $2.2 billion order book. One of the important things looking forward is that those three customers are all increasing the level of work which is good for us.
If you look in that top right-hand corner, to reduce our exposure to cost
30 increases, we’ve maintained a very low percentage of fixed price contracts and then focused during the last 12 months to increase the amount of alliance contracts with Hub. And we’re very pleased with the balance of the order book at the moment.
35 And again, if you look at the top left-hand corner, certainly, the long-term nature of many of our contracts, particularly on the mining side contributes to a reduction in what we call order book volatility with some 50% of our order book now on contracts which have a duration of three years or more. So overall, it’s not just a large order book; it’s a real quality order book which
40 paints a good picture of looking forward.
Over on Slide 22, we’ve just tried to sort of put a bit of a picture there of the areas that we’re focusing on at the moment. If I start over in the West, certainly the Pilbara region with their two major customers over there, BHP
45 Billiton and Rio Tinto, they’re both rapidly expanding production, which is requiring a lot of infrastructure work and further contract mining. And we anticipate sort of $300 million to $400 million a year of work out of the Pilbara ion ore.
In WA, bottom left-hand corner, the government infrastructure has been a very long-term business for us. It’s one of our backbones of our construction business. And we expect with the booming WI economy to continue to see a good flow of work from there. And I think you have all seen that last week we
5 picked up an $80 million road contract in Perth.
Moving over to the right-hand side in Queensland, certainly the Bowen Basin at the moment is proving to be a real powerhouse for us. We’ve got three mining projects up there at the moment and two construction contracts. And
10 we expect that in the 2009 year we’ll generate some 400 million of revenue out of the Bowen Basin.
Bottom right-hand corner, what we call the East Coast infrastructure market for government, it’s still our biggest growth area in the longer term. Certainly,
15 at the moment, Queensland is booming. But we would have to say that New South Wales is slow to deliver. We do, however, currently have some six contracts across the three East Coast states for construction. And we would expect that to grow in the next 12 months. And we’re also targeting a number of projects in joint venture with Leighton under our memorandum of
20 understanding.
Across the rest of Australia, certainly there is quite a few opportunities on the mining side. And we’re seeing further growth in a lot of our existing contracts like at Olympic Dam and Argo.
25
And probably the newest area for us is our sort of increased focus on overseas. And we’re starting to see some traction there. We’ve got our existing contract in Malaysia, the new contracts starting in Indonesia, and we’ve got further work in the next 6 to 12 months starting up in Vietnam and
30 Hong Kong. So, you will see us starting to have further success in those areas.
Just moving off the order book then onto Slide 23, and I won’t dwell on it for long, but it’s just a couple of finance projects. Probably following on from the
35 previous comment about BHP Billiton, that top left-hand corner is Newman Hub, that’s a big construction contract we have as part of BHP Billiton’s. RPG4 expansion. It’s a large concrete project with the workforce of about 300.
40 Bottom left-hand corner is the House Street Bridge. I think most of you will be aware that that project has now got full approval and construction is underway, and we’ll be ramping up that over the next 12 months. Certainly, a landmark project for us; very, very high profile.
45 And if you look in the right-hand side of that slide, it’s a photo of our major road project in WA which is the Mitchell Freeway. It’s the major freeway heading north, four-lane freeway. And it also incorporates the movement where we had to relocate the existing railway line.
So, construction projects right across the country are all running well.
Moving over to Slide 24, again, a couple of quick shots. Left-hand side, that’s our iron ore contract for BHP Billiton at Orebody 18, which also incorporates
5 the (inaudible) (00:23:54) mine just next door and currently running at sort of 12 to 15 million tons a year of production. But once the RPG4 expansion is completed in the first half of calendar 2009, we would see those two mines increase capacity. And I think just to give you a bit of a scale of the amount of work we’ve got in the Pilbara, I think our current workforce up there between
10 mining and construction is nearly 800 people.
Top right-hand side, the Tarago project, it’s our a largest underground project, four-year contract with Rio Tinto to develop a new block cave mine now well underway. And we’ve got a workforce in excess of 300 there.
15
And bottom right-hand side is the major contract we have for BHP Billiton, Olympic Dam. It’s been there since 2004. It’s a long-term contract and again, a workforce of about 300. And with the planned expansions at Olympic Dam, we would expect that the volume of work we’ve got there to increase in the
20 next 12 months.
Moving onto industry outlook which just flip over Slide 25, but, you know, really as an introduction. It’s probably fair to say but not withstanding what’s going on in world economies and share markets and, you know, some states
25 of Australia seeing a slowing of growth, certainly the two key areas we operate in are not seeing any slowing. The resources industry continues to grow, not withstanding some reduction in commodity prices. And on the infrastructure, there’s certainly no sign of government slowing down. So we seem to be fairly well insulated from problems that some parts of the
30 economy are seeing.
So on Slide 26, I mean there’s many, many titles of this infrastructure pipeline or infrastructure expenditure. But certainly what we’re seeing is continual planned investment across resources, mainly to do with increasing the supply
35 chain capacity, so it’s rail and port work, and then for government, a lot of investment in rail, road and water. And around the Australia now there’s certainly in the hundreds of millions being invested, so plenty of work to see us grow.
40 Moving onto Slide 27, and this is really about resources and notwithstanding, as I said, the drop-off in some of the commodity prices we’re seeing no reduction in the requirement for volumes. Certainly in the areas of ion ore and coal, all the major producers are wanting to ramp up. And for a lot of the base metal operation certainly for the very large companies, they are still extremely
45 profitable even with some drop-off in commodity prices. And again, they’re all pushing for more productions.
So that table there shows the increase forecast, the contract mining and it’s obviously very, very significant from a number of around 6 billion per annum in 2008, you know, getting towards 10 or 12 billion by 2013. So, very, very rapid growth in contract mining. And I think that reinforces that it’s not just the growth in commodities but we are seeing at the moment that the major mining houses will and truly wanting to use contractors. It’s a good outlook for us.
5
Just moving onto Slide 28, and I’ve got a couple of slides here. I just want to cover off on some of the challenges that we are seeing around the industry at the moment and how we’re handling it. And really the four main areas are, you know, equipment, supply, cost pressures, credit crisis and people.
10
So if you flip forward onto Slide 29, and this one is really about equipment lead times and tire supply. And certainly, both of those remain a significant challenge for the industry. Certainly on the tire side, we’ve addressed it by entering into a very large long-term tire supply contract with the Chinese
15 manufacturer. And that contract also involves a lot of input on technology to manufacture tires to suit our requirements in Australia. And that contract will supplement the existing long-term supply contract we have with Goodyear and between those two, we now have sufficient supply of tires to meet not only our current requirements but our forecast growth.
20
On the equipment side, we’ve seen, you know, lead time slipped out from, you know, one to two years where it’s now two to three years out. And what we’ve done there is we’ve placed significant put orders for equipment. And those orders sort of go out three to four years now. And basically we’ve put
25 orders in place to meet most of the requirements we have to meet our growth targets. So, at the moment, we think we’ve got sort of the issues of the tires and equipment pretty well covered.