Mining slump takes toll on Joy Global

With the global demand for mining continuing to decline and its stock trading near its 52-week low, the board of directors of Milwaukee-based Joy Global Inc. has authorized the company to repurchase up to $1.0 billion in shares of common stock over the next 36 months.

Joy Global’s stock traded today at $48.46 per share, near its low for the year of $47.83 and far below its 52-week high of $60.19.

The mining equipment manufacturer today reported third quarter net income of $183.2 million, or $1.71 per share, down from $193.6 million, or $1.87 per share, in the same period a year ago. Quarterly net sales dipped to $1.3 billion from $1.4 billion a year earlier.

“Once again, the quarter’s results demonstrate strong operational efficiencies and weak market conditions,” said Mike Sutherlin, President and Chief Executive Officer. “The market has become even more challenging, with declines in order rates for both original equipment and aftermarket. The supply surplus that was centered in the U.S. coal market last year has migrated to the international markets, and they are now going through similar aftermarket corrections to that in the U.S. Based on the U.S. experience, we expect this to create headwinds for most of the next year. Although original equipment orders have always been lumpy, the uncertainty around their timing has increased. A select number of projects are continuing to move forward, but at a measured pace so they do not get ahead of the market. As a result, we expect the order rate to take a step down from our previous outlook until both demand and commodity pricing improve, but at the same time we expect the run rate to be above that of the current quarter.”

Prices for industrial metals and bulk commodities have declined by 20 to 40 percent over the last 18 months. Seaborne coal prices have declined 17 percent since the beginning of the year, and China domestic coal prices have fallen nearly 20 percent. Lower pricing is making higher cost mines uneconomic and will result in closures that will rebalance the market. Until this happens, there is little incentive to invest in new mine capacity.

Efficiencies remain a priority for the company as the demand for mining equipment continues to slump, Sutherlin said.

“We continue to position our business for the markets ahead. We have been focused on lowering our cost base to deliver strong results in softer market conditions, and to improve our leverage when growth returns. Our previously announced cost reduction programs are delivering savings ahead of schedule, and we are expanding these programs to adjust to a lowered outlook for 2014.”

Most mined commodities are in or near supply surplus for the first time in more than a decade, Sutherlin said. This is primarily the result of the post-recession economic recovery falling short of expectations, he said.

The Eurozone is just starting to recover from a multi-year recession, China growth has slowed and growth in the United States remains sluggish.

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