Heavy engineering company Bradken Limited (ASX: BKN) has been viewed by a number of analysts as somewhat shielded from the slowdown in the resources sector thanks to the company's role as a leading supplier of consumable and capital products to the mining, rail freight, oil & gas and power generation industries. The exposure to a number of industries and the consumable nature of its products means Bradken is primarily exposed to producers not explorers.
On the one hand, compared with a number of other mining service companies such as drilling contractor Boart Longyear Ltd (ASX: BLY) or heavy equipment supplier Emeco Holdings Limited (ASX: EHL), Bradken has indeed been somewhat protected, however on the other hand as the results just released show, it has been unable to completely escape the slowdown.
The results
After reporting a 10% decline in sales and only a 4% decrease in underlying net profit after tax (NPAT) for the financial year (FY) ending 30 June 2013, Bradken has seen a significant deterioration over the first half of the current FY 2014.
Results show a 17% decline in sales half-on-half and an 18.4% fall in NPAT which equates to 22.5 cents per share (cps). In response to the lower earnings, the board has cut the dividend by 25% on the prior corresponding period to 15 cps.
Outlook
Historically the second half has been stronger than the first half and that is forecast to be the case again this year. Earnings before interest, tax, depreciation and amortisation (EBITDA) were $86.2 million for the first half and management is forecasting a full-year EBITDA of around $180 million. This would appear to imply a 48%/52% split and full-year earnings per share of 46.9 cps.
Foolish takeaway
If my numbers are correct and earnings per share for FY 2014 come in around 46.9 cps then this is significantly below the current consensus earnings forecast provided by Morningstar Research of 55.2 cps. This could result in some volatility in the share price and shareholders could be in for a bumpy ride in the next few days.