Joy Plummets After Cutting 2015 Forecasts on Mining Demand

Updated on
  • Company reducing reliance on selling equipment to coal miners
  • CEO says Joy working to offset fewer sales of new equipment

Joy Global Inc., the world’s biggest manufacturer of underground mining equipment, fell the most in more than six years after cutting its forecast for fiscal 2015 earnings and revenue amid a global commodity downturn.

Joy tumbled 15 percent to $18.90 at the close in New York, the most since November 2008 and the biggest decline today in the Standard & Poor’s 500 Index. Joy’s shares have plunged 59 percent this year as struggling miners buy less machinery. Caterpillar Inc., a rival mining-equipment maker, fell 2.2 percent to $74.45, the biggest decline in the Dow Jones Industrial Average.

Adjusted profit in the fiscal year through October will be $1.80 a share, Milwaukee-based Joy said Thursday in a statement. That compares with a projection in June for per-share profit in the low end of $2.50 to $3, and the $2.42 average of 20 analysts’ estimates compiled by Bloomberg. Revenue this year will be about $3.1 billion, lower than the $3.3 billion to $3.6 billion the company had earlier forecast and the $3.28 billion average estimate.

‘Steady Downturn’

Joy is among equipment makers suffering as their customers around the world cut capital expenditures, idle mines and reduce output amid a global commodities rout.

“This one has been a steady downturn and we gave you a pretty rough outlook, a pretty brutal outlook on commodity,” Chief Executive Officer Ted Doheny said on a conference call Thursday to discuss the results. “We think we can help our customers right now in this tough market drop their cost curve with some new products and new technologies.”

Doheny is working to offset fewer sales of new equipment with revenue from replacement parts and service, and spent 110 million euros ($122 million) to buy mining-equipment manufacturer Montabert SAS, increasing Joy’s exposure to hard rock-mining customers and reducing reliance on coal producers.

“With basically every global end market that Joy participates in oversupplied and indications that demand remains lackluster at best and under pressure at worst, it is hard to see the declining order/earnings trend reversing in 2016,” Joel Tiss, a New York-based analyst at BMO Capital Markets, said in a note Thursday.

U.S. coal production will fall to about 917 million tons this year, the lowest in 29 years, according to the Energy Information Administration. Thermal coal burned in power plants is facing increasing competition from cheap natural gas and the price of metallurgical coal used to make steel has tumbled as China’s industrial output has slowed.