KHD has another great quarter, future looks tough
KHD Humboldt Wedag Ltd. (KHD: 0.00 N/A N/A) has released their 3rd quarter results and through at least September 30 the company’s growth was still on track. Here are some of the figures as compared to the second quarter of 2008 and the 3rd quarter of 2007.
- Revenues: $193.6 million, +34% , +29%
- Net income per share: $1.01, +60%, +58%
- Order backlog: $1.1 billion, -15%, +39%
For the first nine months earnings were 51% higher than the same period of 2007. The order backlog is concentrated in the emerging economies of Russia/Eastern Europe, Asia and the Middle East.
The financial crisis shows up in the new order intake of only $81 million, a decrease of 65% compared to the 3rd quarter of 2007. The company news release stated that many project awards are being delayed or cancelled on fears of financial turmoil and questions on availability of financing. Management also noted they have been approached by some customers that are facing liquidity issues and want to renegotiate terms of their contracts.
The company acknowledges significant impact on their business if credit for their customers continues to be tight. They are assessing the impact on their current order bank and working to find solutions to maintain business and profitability in the future. One bright spot is that KHD is not reliant on borrowing for their own business and have cash on hand of over $400 million.
Now is a tough time for stock that project future troubles. First, the market has driven share prices much lower on anticipation of bad news. Then on the actual report of bad news the stock gets hammered again. And in the case of KHD there is no real bad news yet, but future profits may suffer. The long term prospects for KHD remain bright as the emerging markets where they sell their concrete and mineral processing equipment will need those products for their exploding infrastructure needs, but until credit markets return to a more normal state continued growth may be problematic.
KHD is a component of this site’s hypothetical Opportunities Portfolio. As a strong believer in KHD’s long term prospects I may be increasing the portfolio’s holdings if the stock falls significantly.
If you enjoyed this post, please consider to leave a comment or subscribe to the feed and get future articles delivered to your feed reader.
Comments
No comments yet.
Leave a comment