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Master Drilling, the global mining services provider, has experienced a significant setback, with its profits plummeting by a staggering 75% in the six months to June. The culprit, according to CEO Danie Pretorius, was a pair of unexpected write-downs demanded by the company’s auditors.
“It came as a complete shock,” Pretorius confessed. “We had a solid six months, and then our auditors blindsided us with these write-downs. They insisted we impair assets that we were still planning to use.”
The write-downs pertained to reverse circulation (RC) drilling equipment and a mobile tunnel boring machine. While the RC equipment was temporarily idle in North and Central America, Pretorius assured that it would soon be deployed in other global mining sectors.
The tunnel boring machine, however, faced a more uncertain future due to fluctuating commodity prices within its target industry. “We haven’t secured a formal agreement yet to protect future cash flows,” Pretorius explained. “Until we have that in place, the auditors were adamant about the write-down.”
Despite the financial blow, Pretorius remains optimistic about Master Drilling’s prospects. “We’re confident in our ability to find new business for these machines,” he stated. “We’re hopeful that the tunnel boring machine will be on contract early next year, but it’s contingent on securing a written agreement.”
While the write-downs are non-cash items, they significantly impacted the company’s earnings per share. Basic earnings per share plummeted by 78% to 37.5 cents from 171.3 cents in the corresponding period last year.
However, headline earnings per share, which exclude certain non-operating items, only declined by 0.5% to 168.6 cents from 169.5 cents. This was primarily due to a 17% increase in revenue to $127 million.
Pretorius, known for his conservative business outlook, believes that Master Drilling is well-positioned to capitalize on the growing demand for sustainable mining solutions. “We’ve been closely following the transition to the green economy,” he said. “Our long-term contracts, diversified operations, and focus on innovation put us in a strong position to benefit from this trend.”
The CEO also noted that the priorities of major mining companies have shifted in recent years. “Five years ago, it was all about cost reduction,” he explained. “Now, they’re more concerned with accelerating access to ore bodies. Our services align perfectly with this new focus.”
As Master Drilling navigates these challenging times, Pretorius remains determined to steer the company toward a brighter future. With its focus on innovation, global reach, and commitment to sustainable mining practices, the company is well-equipped to overcome current obstacles and emerge stronger than ever.
