Westrac faces tough markets PDF Print E-mail
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Thursday, 15 November 2012 14:01

Seven Group Holdings is upbeat despite facing tough markets for its Chinese and Australian mining equipment businesses, and media operations.

 

Managing director Peter Gammell said the conglomerate expects underlying profit in the range of $200 million to $220 million for the first half of 2012/13.

"It should be noted this is a significant increase on the previous corresponding period with $169 million ... somewhere between 18 and 30-odd per cent, so we are actually doing very well," Mr Gammell told the company's annual general meeting in Sydney.

Seven Group also flagged a possible sale of its 45 per cent owned Coates Hire equipment hire business.

Coates is co-owned with private equity outfit Carlyle Group.

Mr Gammell said that, in response to "a number of inbound inquiries from potential buyers", the owners had engaged investment bank Goldman Sachs to advise on a strategic review.

"The objective is to see what is the value of the business and who might want to come and invest in it," Mr Gammell told reporters after the meeting.

The review is expected to take several months.

 

Despite the forecast of increased earnings, Seven Group said the outlook for its Westrac construction and mining equipment operations in China was uncertain due to declining trading conditions.

Chairman Kerry Stokes said lower growth in China had reduced demand for construction machinery and the company was seeking to cut operating costs as a result.

"Despite the challenges, we are confident in the growth outlook for China and in particular the continuing development of that country's mining and infrastructure sectors," Mr Stokes said.

In Australia, Westrac expects fewer heavy machinery orders in the second half of 2012/13 due to cancelled or deferred mining projects.

Seven Group owns 33 per cent of Seven West Media, which comprises the Seven TV network, West Australian Newspapers, Pacific Magazines and Yahoo!7.

Seven Group also holds an 11.4 per cent stake in Prime Media.

It sold its 25 per cent stake in Consolidated Media Holdings (CMH) to News Corp in October, following News' agreement to buy James Packer's majority holding in CMH. Seven Group will receive $491 million from the sale.

Mr Gammell said the Australian advertising market remains soft and the outlook for media businesses uncertain.

He said he did not believe the current Seven West share price - currently around $1.375 from a year high of $3.80 - properly reflected the company's value.

He highlighted the increased Monday-to-Friday circulation of The West Australian newspaper, saying the result "demonstrates that the West is still a very good media asset".

Mr Gammell told reporters he did not want to move The West Australian towards a digital-focused model - such as Fairfax Media has adopted - too quickly as there was still strength in the print business.

"We've got lots of time to watch other people and see what works," he said.



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