The speed and depth of the downturn surprised Boart Longyear management.After axing more than 3500 jobs worldwide last year and another 2300 in the first six months of the year, drill contractor Boart Longyear has flagged further cuts amid the ongoing contraction in mining activity.
In the June half it posted a net loss of $US329 million, a reversal from the net profit of $US98 million earned a year earlier, largely due to heavy write-offs and provisions. Revenue slumped to $US719 million from $US1.1 billion.
Putting the restructuring provisions of $US315.5 million to one side, the company said second-half earnings were likely to be worse than the first half, amid declining drill utilisation.
Additionally, price declines across the industry are only now starting to be felt, which will put further pressure on earnings.
Earlier, Boart Longyear had guided analysts to a full-year net profit of between $US116 million and $US159 million, although it warned on Monday that even the lower end of this range could be optimistic. ”Significant industry volatility in the second half could materially impact performance,” it said, opening the door to even weaker results.
”Operating conditions and key performance indicators have continued to deteriorate early in the second half of the year.
”The company expects its second-half 2013 result to be lower than the adjusted result for the first half despite the benefit of restructuring initiatives.”
Investors may not be fully aware of the ”risk of price erosion in the second half and may assume larger benefits in 2013 from the company’s cost reduction efforts than are likely to be achieved”, it warned investors.
”Although I have 30-plus years in the commodity and mining markets, it has surprised me,” the company’s president and chief executive, Richard O’Brien, said of the speed and depth of the downturn.
”We’re fighting against a decline which is unprecedented in a lot of ways. The market will come back, I can’t predict when, but I can tell you it will.”
Boart told investors that it was battening down the hatches for a sustained downturn.
”We are not assuming that the market will come back in the near term, and we are prepared for a difficult rest of 2013 and 2014,” Alan Sides, the group’s drilling division head, told analysts.
The company has become embroiled in a tax dispute with the Canadian government, which alleges transfer pricing, with a claim of $C69 million ($73 million), which could rise further.
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