Seven Group defies mining downturn

Seven Group Holdings expects to defy an expected fall in heavy equipment orders and lift its full year earnings by up to 20 per cent.

The industrials and media business' net profit surged almost fivefold for its first half.

This was due mainly to strong demand for mining services equipment, with its heavy equipment business WesTrac benefiting from large fleet deliveries.

But chief executive Peter Gammell said he did not expect this level of demand to continue into the second half.

"The second half will not see this level of product sales and we are therefore anticipating a more tempered second half, with underlying group NPAT (net profit after tax) returning to a level similar to the second half of 2012," the company said.

Despite expectations of a flat second half, Seven said it still expects that underlying group net profit after tax for the year will rise by 10-20 per cent.

However it said this would depend on the timing of deliveries for large mining projects and the share price movement of Seven West Media.

Seven on Tuesday reported a net profit of $256.8 million for the six months to December 31, up from $52.1 million in the previous corresponding period.

The result was aided by a $50.1 million gain from the group's stake in Consolidated Media Holdings to Rupert Murdoch's News Corp.

Morningstar analyst Ross MacMillan said WesTrac performed particularly well during the half for Seven, especially considering major miners had cut their capital expenditure.

"Obviously the major mining companies, BHP, Rio and Fortescue, are talking about lowering their capital expenditure and limiting their operating costs and that will have an impact, but Caterpillar has a maintenance business as well so they're going to get a recurring stream of maintenance work," he said.

Mr MacMillan said as the downturn in the mining services sector continues Seven may decide to acquire more media companies.

While media companies were also facing difficulties, Seven's assets were performing well and the company may see it as a good opportunity to acquire companies for a good price, he said.

Seven Group's current media investments include a 35.3 per cent stake in Seven West Media - which includes the Seven Network, newspapers and magazines - and an 11.4 per cent shareholding in regional TV outfit Prime Media.

Shares in Seven Group closed 46 cents, or 4.58 per cent higher at $10.51.

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