Austin Engineering (ASX:ANG) reported a challenging first half of financial year 2026, with management pointing to operational inefficiencies and contract-related margin pressure as the primary drivers of weaker earnings despite broadly stable revenue. Chief Executive Officer and Managing Director Sy van Dyk said the result was “disappointing and below what we can deliver as a team,” but emphasized the issues were operational and within the company’s control rather than a reflection of underlying demand or competitive position.
Revenue mixed by region as earnings decline
Group revenue for the half was AUD 170.3 million, down 3% year-over-year, reflecting weaker performance in APAC and Chile partly offset by growth in North America. CFO David Bonomini said EBITDA declined 63% to AUD 8.0 million, while net profit after tax fell to AUD 2.0 million from AUD 13.4 million in the prior corresponding period.
On profitability by region, Bonomini said the earnings decline was driven by:
- South America EBITDA loss of AUD 4.1 million, reflecting operational inefficiencies, restructuring costs, and a loss-making OEM contract in Chile.
- North America EBITDA of AUD 4.2 million, down due to labor inefficiencies and increased use of external contractors and outsourced manufacturers.
- APAC EBITDA of AUD 10.6 million, with stronger Australian bucket performance offset by inefficiencies in Indonesia and delayed tray orders.
Chile OEM contract drives margin pressure and restructuring
Management spent significant time addressing performance issues in the Chilean business, which included taking on a large OEM contract. Van Dyk said it became clear the Chile operation was ill-prepared for the volume and manufacturing requirements of the OEM specifications, leading to labor and skills productivity issues and strained capacity. To meet delivery requirements, production was shifted in part to Batam, which management said helped in the short term but spread margin dilution to other parts of the business.
Van Dyk said the OEM contract is being renegotiated and the company will continue only if improved pricing and terms are agreed; otherwise, the contract will end in April 2026 and no further orders will be accepted. The contract contributed to negative performance in Chile, including a negative EBITDA of AUD 3.2 million in the half, which included a AUD 1.6 million onerous contract provision against product in work-in-progress at December 2025.
Actions outlined to stabilize Chile included new leadership, tighter control of steel yard processes, reductions in direct headcount, replacement of underperforming subcontractors, and improved planning and scheduling intended to lift throughput and lower costs. In the Q&A, van Dyk said he expects Chile to return to profitability “later in the fourth quarter of this year,” and said improved margins are targeted by the end of the half as operational actions take hold.
North America growth continues, but scaling strains margins
Van Dyk said North American revenue has “basically triple[d] over the last 4 years,” but the pace of growth has outstripped the company’s ability to scale operations, forcing heavier use of contract labor and outsourcing. Management said it is not seeking to slow growth, but is now focused on backfilling operational capacity and improving workshop efficiencies, including de-bottlenecking at the Casper facility and increasing in-house production capability.
Order levels in North America were lower in the first half due to timing, with a stronger order cycle expected in the second half. In response to an analyst question on revised full-year revenue expectations, van Dyk said the reduction versus prior guidance was “mostly from North America,” driven by delayed expected orders from a major Canadian oil sands customer. He said the customer had invested heavily in new trucks and diverted capital away from other projects, delaying body replacement orders and making it difficult for Austin to deliver within the June reporting period even if orders arrive promptly.
Cash flow improves; dividend declared as workforce reduced
Despite weaker earnings, Austin posted improved cash generation. Van Dyk reported operating cash flow of AUD 6.6 million, an AUD 11 million turnaround from the prior-year first-half outflow, supporting free cash flow of just over AUD 3 million after interest, tax and capex. Bonomini said the company finished the half with AUD 15.8 million in cash and free cash flow of AUD 3.1 million, aided by working capital improvements and lower capital expenditure of AUD 3.5 million.
The board declared an interim dividend of AUD 0.003 per share, fully franked. In Q&A, van Dyk said the dividend would cost about AUD 2 million and was supported by low leverage and expectations for continuing cash flows. Net debt rose to AUD 18.2 million from AUD 12.8 million, with Bonomini citing working capital support for the U.S. and Chile, dividend payments, and a AUD 1.2 million share buyback. Management said the share buyback remains active. Van Dyk also said the company plans to refinance debt due to expire in November, ideally extending it by two years.
Operationally, van Dyk said the company adjusted its workforce to match activity levels over the last six months, reducing total headcount to 1,222 at December 2025, primarily across Indonesia and Chile.
Updated FY26 guidance and operational focus
For the full year, Austin revised revenue guidance to greater than AUD 350 million and statutory EBITDA (excluding FX movements) to AUD 14 million to AUD 16 million. Management said this implies second-half EBITDA of roughly AUD 11 million to AUD 13 million, and noted it does not expect material items from the first half to repeat at the same magnitude.
Van Dyk reiterated the company’s strategic focus on product leadership, customer focus, and manufacturing excellence, including efforts to standardize operational systems and improve productivity. In response to a question about robotics, he said the company is in the “starting blocks” of automation, noting the use of welding tools such as Geckos and Bugos and two “Cobalts” in North America, while also stating there is a robot in Perth that is not currently utilized.
Looking ahead, management pointed to additional orders secured after the half, including AUD 21 million in trade orders in APAC and a total of AUD 51 million in post-period orders referenced by van Dyk, as factors supporting a stronger second half as operational initiatives progress.
About Austin Engineering (ASX:ANG)
Austin Engineering Limited, together with its subsidiaries, manufactures, repairs, overhauls, and supplies mining attachment products, and other related products and services for the industrial and resources-related business sectors. It offers excavator, face shovel, front end loader, and stemming buckets; rope shovel dippers; and wear liner kits for mining applications, including hard rock, iron ore, and coal. The company also provides surface mining dump truck bodies; underground dump bodies; tyre handlers for surface and underground equipment; and ancillary equipment, such as live and shovel line cable reels, loader mounted cable reels, cable handlers, fork frames, crane jibs, quick couplers, man cages, and other products for mining applications.
