Fanning up strong trading
HOWDEN LOOKS well positioned in the industries it services, which is just about everybody who needs a specialised fan or compressor, particularly the petrochemical and mining industries. An upbeat voluntary chairman’s statement at its AGM a month ago noted order book levels were well ahead of the position at its December 2010 year-end.
Parts of South Africa’s mining industry are battling a bit, so it was encouraging to read in the statement that “the demand for mining fans in mineral-rich countries to the north of SA has increased orders on hand in this sector”. Howden serves mostly the local market, so it makes sense to gain a larger presence in other parts of Africa.
Last financial results saw a downturn in turnover and earnings. But what was worth noting was both cash generation and cash flow from operations were up. If a company can keep cash flow going through tough times it’s a good sign.
Howden also recently made what looks like a useful acquisition: Netherlands-based Thomassen Compression Systems. It says it will expand its compressor range, as Thomassen specialises in high power applications used primarily in the oil refining and petrochemical industries. Howden says the acquisition will enhance earnings per share in its current financial year and is expected to cover its cost of capital in 2012, the first full year of ownership.
Like so much else, Howden will need a revival in economic activity to gain the full benefit of the specialist products it provides. But it seems it’s heading for a good financial year, with orders up while the economy is low. Its share price hasn’t done badly over the past year, up around 11%. But it’s likely to accelerate in its current year, based on divisions that trade strongly and have market-leading positions.
Howden also pays a decent dividend, even through difficult financial years such