Bad news usually triggers a sell-off by nervous investors, and when it’s delivered in the wake of an attention-grabbing half-percent rate cut by the world’s most important central bank, the reaction is very negative.
That’s what Brisbane-based testing multinational ALS experienced on Thursday.
ALS (ASX:ALQ) warned of lower earnings ahead of its November 19 release of half-year results, causing shares to tumble more than 12% at one point.
The warning was based on weaker-than-expected testing volumes within its minerals division, as resource companies cut exploration spending due to falling prices for key commodities like iron ore, copper, lithium, nickel, and some semi-precious metals.
ALS reported that volumes in geochemistry and metallurgy “remain patchy,” with fluctuations “even more pronounced” in July and August, which mark the start of a new quarter and a new financial year for many Australian resource groups.
The company noted that slowdowns in volumes have been most significant in Australia and Latin America, leading to downward margin pressure in those markets.
It’s no coincidence that these countries have been the focus of the search for lithium, copper, and nickel over the past few years.
However, ALS said revenues from North America have been more stable, remaining in line with the prior corresponding period, while overall minerals margins “remain resilient” at around 30%.
ALS also indicated that while underlying EBIT for the six months to September is expected to be “slightly ahead” of the prior corresponding period, underlying NPAT is anticipated to decline by around 5%.
In the first half of last year, ALS reported underlying NPAT of $158 million.
However, there was some good news for investors: ALS highlighted growth in its life sciences testing businesses and noted that the integration of recent acquisitions—Nuvisan, Wessling, and York Analytical—was on track.
Corporate costs are broadly in line with guidance, though interest charges are tracking “slightly above” expectations due to higher average debt levels and lease interest costs from recent acquisitions.