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Joy Global expects another tough year

World Coal,

In mid-December, Joy Global released its results for 2012 and forecast for 2013.

Joy Global in 2012

"This has been a transitional year, as we moved from building to depleting backlogs, and from catching up with the market to lowering our base cost. Both sides of those equations have an impact on how we view our fiscal 2013," said Mike Sutherlin, CEO of Joy Global, in a statement. "We not only had slowing in several of our key markets in 2012, this decline occurred progressively during the year and thus had a compounding effect on our incoming order rate.”

This resulted in the company revising down its outlook several times in 2012 and this weakened outlook has been carried over into 2013: “Although there are early positive indicators in each of the most adversely affected markets, we do not see near-term recovery,” continued Sutherlin.

Outlook for 2013

The company expects CAPEX to remain soft in 2013, down 10 – 15% year-on-year, as projects are completed and mining companies hold back on further investment: “Recovery in commodity demand must prove that it is sustainable before we will see a broad CAPEX response from our customers.”

In response, Joy Global has already begun a cost-cutting effort and this will continue through 2013. In the final quarter of 2012, the company took a US$ 20 million charge to restructure some of its US pension plans and reduce production capacity to match current order rates. The company expects to spend a further US$ 25 million on restructuring in 2013 as it tries to balance its global manufacturing capacity with demand.

Will China bring some joy?

There may be a glimmer of good news, however, from the company’s Chinese subsidiary, International Mining Machinery (IMM), which endured a tough 2012 due to weakness in the domestic Chinese coal market and disruptions caused by the change in government. Joy Global expects this year to be more positive: “October's bump in electricity demand is encouraging, and we saw that momentum carry into November. We expect 2013 to be a recovery year for IMM, reversing the declines of 2012.“

Overall, the company expects revenues of US$ 4.9 billion to US$ 5.2 billion. But if 2013 is anything like 2012, that forecast may not be the last.

Adapted form press release by Jonathan Rowland.

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