The Emeco Holdings Limited (ASX: EHL) share price is up 449% over the past three years despite a significant downward revaluation by the market in recent months. This is a reflection of the company's successful turnaround after several tough years in the Australian mining services industry.
A couple of years ago, when the Australian mining sector was hitting a slump, things were looking grim for the earthmoving equipment hire company. Commodity prices were weak for a sustained period and major miners were doing anything they could to cut costs.
As a part of this initiative, major miners put an emphasis on making full use of their own operating assets, opting to internalise work that had typically been outsourced. This was a major source of pain for mining service providers like Emeco Holdings.
In FY14, an embattled Emeco made $241m in revenue and posted an operating loss of $275m. Average fleet operating utilisation was just 33%. In 2016, the Emeco share price hit a low of $0.26.
But after a couple years on the brink, Emeco has turned itself around. A three-way merger with rivals Andy's Earthmovers and Orionstone saw the business strengthen and diversify its fleets. As the Australian mining services industry began to see the light of day, Emeco steamed ahead.
In FY18, Emeco grew revenues by 56% and finally returned to profit. Average fleet operating utilisation was 57.4% in FY18. The company has also significantly deleveraged, with net debt to EBITDA of 2.62x compared to 10.29x in FY15.
This dramatic turnaround has seen the Emeco Holdings share price soar. Its 52-week high share price of $4.05 represents a 1,458% increase on its low of 26¢ just two years earlier.
The last several months haven't been as kind to the Emeco Holdings share price, however. Despite no negative market updates, the share price has fallen over 40% from its 52-week high.
