Emeco shareholders hit with more bad news

Shareholders in earth-moving equipment supplier Emeco Holdings (ASX: EHL) continue to cop a hiding due to the company’s heavy exposure to the slowing resource sector.

After last week’s announcement that Managing Director Mr Keith Gordon will step down after less than four years in the job and having presided over a 70% decline in the share price, this week Emeco’s shareholders were told that a major customer, Straits Resources (ASX: SRQ) has decided to place its Indonesian-based mine Mt Muro on ‘care and maintenance’.

While this mine only represents 4% of Emeco’s total fleet of leased vehicles, it represents 28% of Emeco’s Indonesian fleet. Prior to the announcement Emeco’s Indonesian utilisation rate was at just 30%, post-announcement this means that basically the entire Indonesian fleet now stands idle.

By contrast, as at 20 June the Australian fleet utilisation rate stood at 42.5%, Canadian fleet utilisation stood at 55% and global fleet utilisation was at 52%.

Lower utilisation rates are hurting many suppliers to the mining industry. It’s not just heavy equipment suppliers but also housing and accommodation providers such as Fleetwood (ASX: FWD) and staffing solution providers such as Skilled Group (ASX: SKE).

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Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.

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