Profits: Bradken’s Bounce, Cochlear’s Loss, Transurban’s Surge

Mining and rail equipment manufacturer Bradken is on track to meet earlier guidance for a 40% lift in full year profit after a 65% jump in first half earnings.

The company yesterday reported a net profit of $43.05 million for the half year to December 31, up 65.6% and told the market that "Excluding one-off adjustments ... we confirm the current guidance of EBITDA growth of 25 per cent to 30 per cent with NPAT growth in the range of 35 per cent to 40 per cent over FY11 adjusted results".

On an operating (underlying) basis, profit of $43.1 million was up a more modest 13%, after eliminating the impact of one-off items from the previous interim result.

Bradken directors said the booming mining sector had seen demand for it's products reach historically high levels, with the company expanding operations in Australia, North America and Asia.

As a result sales revenue jumped 28% in the half year to $683.2 million.

And revenue from the mining products division rose 26% on the previous corresponding period but reduced sales of ground-engaging tools (earthmovers, etc) had a negative impact.

Bradken expects the latter business to expand sharply in the current half year.

Pressure from Chinese competitors also led to lower margins in the rail division, although sales revenue was up 56%.

The group will pay an interim dividend of 19.5 cents, 5% or 1c higher than the interim payout in 2010-11.

Earnings before interest, tax, depreciation and amortisation (EBITDA) rose 11% to $100.1 million.

Managing director Brian Hodges said Bradken's business strategy would remain unchanged as it continued to take advantage of growth in resource and energy markets, its key sectors.

"Mining markets are expected to continue to expand in future years, providing high margin organic growth," he said.

Despite the solid result, Bradken shares were sold off yesterday, losing 2.7% or 22c to $7.83.

Meanwhile, as expected, Cochlear's interim result (and the full year as well) has taken a hammering from the cost of the mass recall of one of its best selling bionic ear products.

The company yesterday reported a $20 million dollar loss in the first half of the current financial year, thanks to those costs, which will top $100 million, and which were well flagged late last year.

The company earned more than $87 million in the previous first half period. On the same basis, net profit (before the recall costs), dipped to $80 million as the higher value of the Australian dollar crimped margins.

Cochlear described the first half of the financial year as challenging, due in large part to its global recall of the faulty Nucleus C1500 devices.

So far the cost of the recall had hit $138.8 million before tax, the company said yesterday.

The cost was fully expensed at $100.5 million after tax in the first half and the company expects cash costs of $20 to $30 million "over time".

"While the $20 million loss was disappointing, the recall costs have been quarantined and importantly, a record number of recipients received a cochlear implant in the first half," Cochlear chief executive Chris Roberts said in a statement.

Cochlear implant unit sales were down 9% in the first half. The figure excluded more than 2,300 units shipped after the recall and not recognised as revenue.

As of January 31, the company said the proportion of Nucleus C1500 series implants reported as failed was 2.4% of registered implants globally.

Total revenues were $387.5 million, up 3%. Sales, excluding foreign exchange contracts, were $351.2 million, down 1%.

"Cochlear implant (CI) sales, which included accessories and sound processor upgrades, were $311.5 million, up 1% in reported currency and up 7% in constant currency," Cochlear said.

The hearing implant maker said it did not expect to experience supply shortages like it did in late 2011, when it launched the product recall.

"With the ongoing manufacturing ramp-up, we do not anticipate we will be supply constrained in the second half of the year, as we were in the December quarter," Cochlear said.

The company will pay an interim dividend of $1.20 a share, up from $1.05 a year earlier.

Investors liked the fact that the potential losses from the recall were under control and that the company was upbeat about the outlook, especially the easing of the supply problems.

As a result the shares jumped 7.6% or $4.41 to $62.51 yesterday.

And Melbourne based toll road group Transurban saw a 27% rise in first half earnings, thanks to higher revenues and traffic numbers.

Transurban said yesterday its net profit for the six months to December 31 was $93.2 million, up from $74.7 million in the previous corresponding period.

Net profit from its ordinary activities was $96.6 million in the six months to December, up 27% from $76 million in the previous corresponding period.

Proportional toll revenue on the first half of the financial year was $473.8 million, up 6% on the same period in the previous year.

Transurban declared an interim distribution of 14.5c per security, with 3.5c of that fully franked.

That's up from 13c per security a year earlier.

Chief executive Chris Lynch said in yesterday's statement that a strong second half of the financial year would deliver the free cash necessary to deliver the company's guidance of a distribution of at least 29c a security for the full year.

Transurban owns Melbourne's CityLink and Sydney's M2 and Lane Cove Tunnel.

It also holds major stakes in Sydney's M1 Eastern Distributor, Westlink M7 and the M5, plus the Pocahontas Parkway in Virginia in the US.

First half toll revenue growth was strongest on the CityLink and Lane Cove Tunnel roads, the company said.

Traffic numbers grew on the CityLink, Eastern Distributor, M7 and M5, but fell on the M2 and Lane Cove Tunnel.

Construction work to widen the M2 impacted traffic and revenue, while the same work also impacted traffic numbers on the connecting Lane Cove Tunnel, Transurban said.

The M2 work was approximately 50% complete and is expected to be finished in the first half of next year.

The company said last week that CEO Lynch would retire later this year, once a successor had been found.

Despite the improvement Transurban securities lost ground, losing 2c to $5.50.