Alfabs Builds Cash Momentum as Mining Hire Rates Reach $86,500 a Day

Cash Generation Continues Into FY27

Alfabs Australia Limited (ASX:AAL) has delivered a second consecutive quarter of improving free cash flow, reporting $2.4 million for the three months to 30 September 2026. The result extends the company’s post-reset recovery, although the figures are unaudited and include working-capital timing effects.

About $1 million of debtor receipts expected in September arrived in the first days of October, meaning the quarter’s cash result does not capture those collections. After funding growth capital expenditure, Alfabs used excess cash to reduce net debt by $1 million, or 3%, to $35.5 million. That is 18% below the $43.1 million peak recorded in March 2026.

The result builds on the FY26 cash reset, which prioritised cash generation, tighter capital allocation and balance-sheet strength after a year of transition. Alfabs is still targeting a twofold to threefold improvement in free cash flow by FY28, with first-quarter performance described as being in line with that plan.

Mining Hire Rates Gain Momentum

The strongest operating contribution came from mining hire. Average daily hire rates rose 6.3% from the June quarter to $86,500, with 12-month contracts for Continuous Miner #4 and AX-10 Loader #1 secured in July and August as part of the 2026 Shell Program. The company also purchased an Airoduster for $500,000, which has since been placed on hire.

The Continuous Miner agreement follows the Continuous Miner CM04 hire, which had been described as a 12-month contract worth approximately $2.5 million in annualised revenue. Alfabs says the remaining two Driftrunners and AX-10 Loader #2 are progressing more slowly because scheduled maintenance on the existing fleet has taken priority.

Engineering Weakness Keeps Recovery Uneven

Engineering remains the drag on the broader business. Contracted work in hand was $11.9 million at quarter-end, only modestly above $11.6 million in June and well below the $24.5 million recorded a year earlier. No material contracts were awarded during the quarter, a shortfall Alfabs expects to affect the rest of FY27, despite a developing tender pipeline across government infrastructure and industrial work.

The St Mary’s Train Station Upgrade was completed during the period, while smaller fabrication and onsite maintenance projects provided interim activity. Alfabs also spent about $400,000 on seven used coal tram shells and spare parts, expecting to recoup that investment through spare-parts sales during the year and retain the shells for possible future development.

Debt Restructure Remains Dividend Gate

Debt refinancing has advanced to negotiations with potential financing partners, including major Australian banks. Six of the seven conditions required before dividends can be considered have been met, but successful debt restructuring remains the final hurdle. Management said it remains confident an appropriate funding structure and terms can be secured in the near term; no dividend restart has been committed.

Alfabs has maintained its forecast for mining hire-rate growth of 5% to 10% across FY27. It also cautioned that higher thermal coal prices have not yet produced a material lift in equipment demand and that competition remains elevated as more hire equipment enters the market. With engineering markets still soft, the next meaningful test is whether stronger mining cash flow can continue to offset an order book that has yet to recover.