Steady rise for Snorkel

Tanfield has estimated that Snorkel’s 2014 revenue will be about US$100 million. This is forecast to rise to approximately $150 million in 2015.

The Tanfield statement follows its sale of 51% of the Snorkel business in 2013 to US-based Xtreme manufacturing, and added there has so far been a working capital investment of over $45 million in Snorkel. It said the spare parts business is now operating at 100% coverage.

“The Snorkel business continues to progress well. Production throughout the year has increased significantly from its run rate during 2013,” the statement reported. “The business has taken advantage of the general uplift in the market for its products.”

Thanks to a growing order book and the investment, Tanfield supplier constraints have been reduced and the spares business has improved dramatically, it said. “This is important in that it means that Snorkel can more effectively support its machines in the field, which was difficult last year due to cash restraints.”

Tanfield has put a value of its 49% share of Snorkel at $60.1 million, which represents approximately 26p ($0.41) per share.

According to the statement Ahern Rental, which is also owned by Xtreme’s owner Don Ahern, has absorbed the full costs of certain Snorkel assembly and distribution centres. Also a number of functions have been consolidated onto one site. "This strategic restructuring has had the benefit of extending Ahern's reach whilst maintaining Snorkel distribution at much reduced cost,” said Tanfield.

A number of temporary staff have been laid off to accommodate the move into the winter months in anticipation of increased demand in the spring. These actions have reduced the breakeven level of business turnover, added the company.

Snorkel is now redesigning its catalogue of equipment with a view to increasing the commonality of parts, reducing build cost and improving functionality for the end user. It is also carrying out an extensive machine rebuild programme, with a 200,000 square foot rebuild centre established in Kansas, USA.

“The Tanfield Board takes the view that the signs are very promising for Snorkel in its progress to sustainable profitability. Don Ahern has made a number of positive statements about Snorkel supporting the above update, which the board views as very encouraging."

It added, “As a note of caution the Board would point out that the market is cyclical. The business is moving into the winter months which are typically quieter in the industry. Building stock in anticipation of the upturn in spring depends upon the availability of working capital which Snorkel now seems to have at its disposal.”