Seven puts stakes under review - Sydney Morning Herald

Seven Group Holdings says the outlook is strong, but that it is reviewing both its Caterpillar business in China and its stake in Coates Hire.

The economic slowdown in China has forced the industrial and media conglomerate into a review of its Caterpillar business that is expected to lead to extensive cost cutting to realign expenses with declining revenue.

Seven’s executive chairman, Kerry Stokes, told shareholders in Sydney that it had been a challenging 12 months for its territories in China particularly in the latter part of the financial year and ‘‘we are currently working to ensure that our cost base there reflects this lower level of demand’’.

Mr Stokes said the outlook for Seven was strong with the company expecting first half underlying net profit in the range of $200 million to $220 million.

Seven managing director Peter Gammell said the company remained cautious regarding Westrac China and noted that current trading conditions continued to decline.

‘‘As a result, sales and EBITDA for the region will be significantly down on the prior corresponding period,’’ he said.

‘‘We’re going through a fairly extensive review annd that process will roll out through the next few months,’’ Mr Gemmell told reporters after the meeting.

‘‘We had quite an aggressive rollout strategy to go and pick up more coverage area, we are just having to pull that back for the moment. This is not China falling off a cliff its just about making sure you don’t size up your business for a level that’s not there,’’ he said.

'Ownership alternatives' for Coates Hire

Seven also flagged a strategic review of the Coates Hire business it co-owns with private equity firm The Carlyle Group.

Seven said the process was responding to recent interest in the asset - of which it owns 45 per cent - with Goldman Sachs placed in charge of the review of ‘‘ownership alternatives’’.

The two partners attempted to float the business with a $3 billion valuation earlier this year and Mr Gammell signalled the current process to is driven more by Carlyle looking for an exit than Seven looking for a transaction.

‘‘Clearly there is not an IPO market available at the moment, but we have had some inbound inquiries as a result of that whole process,’’ he told reporters after Seven’s shareholder meeting.

He said the fact that Carlyle is seeking a sale is not a reflection on the business.

‘‘This is not particularly surprising, that’s what private equity does so its not a reflection on the business, it’s an excellent business ... we’re believers in Coates as a business but we should enable Carlyle to have a look at this process,’’ he said.

Mr Gammell would not be draw on whether Seven is a potential buyer or seller in this process.

‘‘That’s not the objective, never say never to anything but ... the objective is to see what is the value of the business and who might else want to come in and invest in it.’’