Money
Issue No. 4 - February/March 2002
Engineered investment
by Jed Richards
South Australia’s economy has traditionally been strongly based on the engineering and manufacturing industries. However, local investors have not always been aware of the advantages of incorporating engineering companies into their diversified investment portfolios.
While it is not possible for anyone to predict exactly what will happen to any stock over the long term, it is worth making some sector-wide observations.
Between 1993 and 1997, the engineering index on the Australian Stock Exchange more than doubled from 1,000 points to more than 2,100 in 1997. Since 1997 the index has pulled back to steadier levels of around 1,300 points.
Chart 1: Engineering index - Australian Stock Exchange
Several stocks included in the index are the Crane Group, the United Group Limited and Austal Limited.
The Crane Group has a very strong presence in SA with the Crane Aluminium Extrusions plant in Angaston, in the Barossa Valley, and Iplex Pipelines fitting manufacture at Elizabeth. Crane had a full year result of $15.6 million earnings before abnormals expenses. This was not unexpected given the tough conditions in the building market this year. Conditions, which began to improve in April, continued to improve in July and August. This should give CRG a running start in the 2002 financial year and allow profit to increase. Crane is a deep cyclical and earnings can recover quickly (as in 1999). The company has a proven management team but it operates in a difficult industry.
The United Group has released July September 2001 sales figures of $200 million which are up 14 per cent on the same time last year. If revenue can be maintained at these levels they are on track for $800 million in turnover this year which would be up 18 per cent on previous corresponding period. The order book fell from 30 June levels of $1.23 billion to $1.14 ...
