Master Drilling FY HEPS grows 21.2%

South Africa-based Master Drilling recently released its financial year-end results for 2024, showing a remarkable 11.5% increase in revenue, reaching a record high of $270 million. Despite the top-line growth and robust cash generation, the company faced margin pressure due to asset impairments and underutilization in certain regions. In an exclusive interview with CNBC Africa, the CEO of Master Drilling, Danie Pretorius, addressed key aspects of the company's performance and strategic outlook for the future. Discussing the margin pressure faced by the company, Pretorius highlighted the underperformance of the South American region, particularly in Mexico, resulting in a $5 million loss. He acknowledged the need for improvement in that specific market segment to drive profitability. Additionally, he shed light on the impairments that affected the company's earnings, with potential reversals on the horizon due to ongoing discussions regarding accounting standards. Pretorius also delved into the challenges surrounding certain investments, such as the mobile tunnel boring machine and reverse circulation equipment. He expressed optimism about the possibility of redeploying these assets profitably, citing upcoming projects that could lead to reversals of impairments. The CEO elaborated on the company's capital allocation strategy, emphasizing the importance of balancing investments in capital-intensive technology development and asset-light digital ventures. He outlined key projects in the pipeline, including the shall water project and the reef cutting initiative, underscoring the company's commitment to long-term growth. Addressing concerns about sustainable cash generation, Pretorius reassured stakeholders that the current business landscape, coupled with a healthy order book and pipeline, bodes well for continued cash flow stability. He highlighted the confidence in the pipeline conversion rate and the strong foundation laid by the client base in core markets. Looking ahead to regional performance in 2025, Pretorius expressed optimism about Africa's strength driven by the gold price, while also anticipating a resurgence in South America, particularly with positive trends in the copper market. He discussed the key growth drivers in the South African market in 2024 and emphasized the need for sustainable strategies amid changing market dynamics. In terms of technology advancements, the CEO provided insights into the timeline for commercializing innovations such as the tunnel boring and shaft boring systems, showcasing a mix of short-term and long-term potential for these projects. He also addressed the challenges of managing month-to-month contracts in slim drilling and the importance of cost discipline in volatile market conditions. As Master Drilling looks to the future, Pretorius highlighted the strategic priority of diversification across commodities, regions, and technologies. He pointed to North America and Australia as key focus areas for expansion, citing significant opportunities in exploration and development. Overall, Master Drilling's 2024 performance reflects a balance of achievements and challenges, with a clear focus on long-term growth and sustainability in an evolving market landscape.