Joy Global Inc. JOY, -0.11% which recently agreed to be bought by Komatsu Ltd. (6301.TO), said revenue plunged in the latest period amid the prolonged slump in demand for mining equipment, hurt by lower bookings.
Tokyo-based Komatsu said in July it would buy Joy Global for $2.9 billion, a bet that the mining-equipment market will start to grow again in 2019.
The move would mean the struggling mining-equipment industry will soon be dominated by two large firms: Komatsu and its larger U.S. rival, Caterpillar Inc. (CAT). Joy Global said Thursday the companies continue to expect the deal closing by mid-2017.
For the July quarter, Joy Global Chief Executive Ted Doheny said market conditions and the company’s incoming order rate remain extremely challenged. Total bookings fell 17%, with service orders down 12% compared with the prior year quarter, while original equipment orders plunged 46%.
The maker of giant shovels, conveyor belts and jumbo drills has made moves in recent quarters to cut costs amid sluggish demand from the U.S. coal industry, which has been pressured for years. The company said higher usage of coal to generate electricity amid higher natural gas prices recently, as well as a rise in temperatures in the U.S., helped domestic coal markets some during the latest period.
More than half of Joy Global’s annual sales come from the coal-mining industry, which has been hurt by low prices for natural gas and stricter environmental standards that reduced coal usage for generating electricity. While regulatory pressure in the U.S. has persisted and production is expected to be down 21% this year, the company says markets are slowly rebalancing amid reduced inventories.
But the company warned that these developments have been driven more by supply rationalization as opposed to strengthening demand. Joy said volatility in pricing will likely remain, and market conditions are expected to remain weak through 2017.
Joy reported a fiscal third-quarter profit of $128,000, or zero cents a share, compared with a profit of $51.3 million, or 53 cents, a year earlier. Excluding items, earnings were 10 cents a share for the latest quarter. Revenue fell 26% to $586.6 million.
Analysts polled by Thomson Reuters had forecast 12 cents a share in earnings on $605 million in revenue.