Extract From Emeco Results Update – Equipment rental – demand softening in Australia – 9 November

OPERATIONS UPDATE

The Australian business has been working closely with key customers as they adjust to an environment of lower commodity prices. Utilisation in the Australian business currently sits at 66%, down from 76% at the announcement of full year results in August and significantly below average utilisation of 91% in 2H12. Recent activity in key commodities is as follows:

Iron ore: Equipment deployed to a major miner was off-hired as expected over the past few months. In addition, some mining contractors have off-hired equipment as their contracts with customers were reviewed during periods of low iron ore pricing. Discussions have commenced with major customers in Western Australia regarding potential opportunities, however, any return to work of this equipment is unlikely to take place until the second half rather than during this half as had been expected. A significant fleet of equipment commenced work at an iron ore project in South Australia at the start of November.

Gold: In the gold sector, two customers in Western Australia have downsized their mining operations, choosing not to extend their contracts which had not been anticipated. Another gold customer in the state has significantly increased its fleet as expected which is now complete.

Coal: In New South Wales and Queensland coal, some individual equipment items have been returned (amounting to 4% of the Australian fleet) across a number of customers. In its full year results outlook statement, Emeco flagged that a number of thermal coal contracts would be due for renewal late in 1H13. These contracts, as well as further contracts that had previously been considered highly likely to extend, comprise approximately 15% of the Australian fleet. Although visibility regarding renewal is poor, the Company considers it likely that a number of these contracts will not be renewed.

http://www.aspecthuntley.com.au/asxdata/20121109/pdf/01354329.pdf

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