2nd UPDATE: Joy Global CEO Looking To Expand Equipment Lines

Joy Global Inc. (JOYG) will continue to look for acquisitions to fill out its product lines of mining equipment and expand its production capacity, Chief Executive Mike Sutherlin said Thursday.

Sutherlin said he's interested in adding hydraulic mining excavators and underground hard-rock mining machinery. He added that the company is improving the capabilities of its existing machines to make them more versatile.

The company last month agreed to acquire LeTourneau Technologies Inc. from Rowan Cos. (RDC) for $1.1 billion. LeTourneau will give the Milwaukee company exposure to oil-and gas-drilling equipment and will expand Joy's line of high-horsepower wheel loaders. LeTourneau specializes in giant electric-drive wheel loaders for surface mines. The deal is expected to be completed in the third quarter.

The LeTourneau deal was widely seen as Joy Global's response to Caterpillar Inc.'s (CAT) acquisition of mining equipment manufacturer Bucyrus International Inc. (BUCY). Caterpillar, the world's largest maker of construction equipment by sales, will have a significant size advantage over Joy Global once its purchase of Bucyrus is completed later this year.

Mining companies that shelved mine expansions during the economic recession have been racing to catch up with the rising demand for mined commodities, providing Joy Global with the confidence and profit incentives to make additional investments.

"We are in the early stages of a multiyear expansion" of mine capacity, Sutherlin said during a conference call with analysts. "We're operating with global mine capacity in the mid-90% range. Our customers are very confident that they need to bring more [mine] projects on line."

Higher sales and improved margins propelled a 34% increase in Joy Global's fiscal second-quarter profit. The company topped analysts' estimates for the quarter and raised its outlook for the fiscal year. Orders booked for new equipment, replacement parts and service rose 46% in the quarter from a year earlier.

Second-quarter sales of underground mining equipment rose 19% from a year earlier to $648.3 million, helped by increased shipments of equipment to the U.S. coal industry. Operating income from the underground business rose 42% to $154.9 million.

In the company's surface mining business, sales climbed 15% to $439.9 million on elevated sales of copper and coal mining equipment to customers in South America, Australia and Russia. Operating profit from the business unit rose 9.8% to $101 million.

Joy Global's overall operating margin for the quarter was 22%, compared with 20.1% a year earlier and 17.6% in the first quarter. Sutherlin said the company has been able offset rising prices for raw materials, such as steel, by increasing its equipment prices and lowering other operational expenses.

For the quarter ended April 29, Joy Global reported a net profit of $162 million, or $1.52 a share, up from $120.4 million, or $1.15 a share, a year earlier. Revenue jumped 19% to $1.06 billion. Analysts polled by Thomson Reuters had forecast a per-share profit of $1.35 on $1.03 billion in revenue.

The company said the weaker value of the U.S. dollar against other currencies added $22 million to net sales in the second quarter and added $5 million to operating income.

Joy Global raised current-year earnings per share forecast by 20 cents to $5.30 to $5.60 and boosted its revenue forecast by $100 million to between $4.1 billion and $4.3 billion.

Joy Global's stock was recently up 6% at $91.04 a share.

--By Bob Tita, Dow Jones Newswires; 312-750-4129; [e-mail]