Shares in one of Australia's largest drilling companies, Ausdrill (ASL), have fallen more than 25% after the company lowered its 2014 full year profit forecasts.
The group said it expects to report a net profit after tax of between $35 million and $45 million for the financial year to June 30, 2014, due to weaker-than-expected first quarter results and soft prevailing market conditions.
"The weaker-than-expected outlook reflects a continuation of the challenging market conditions which are expected to remain subdued until the beginning of 2014 when an improvement in selected markets is expected to occur," Ausdrill said,
At 1100 AEDT, Ausdrill shares were 24% lower at $1.045, against a benchmark index fall of 0.25%.
In earlier trade, Ausdrill shares dropped as low as 96 cents.
The company came out of a trading halt this morning after reviewing its current operating performance.
Ausdrill said it remains in a sound financial position but conceded the forecast was "not acceptable, even in these challenging times".
Still, it expects the focus by the mining industry on deferring all non-essential expenditure including capital works, exploration programs and non-critical maintenance will taper in the near future and that surplus capacity will start to diminish in full year 2015.
The company is working on plans and strategies to achieve better returns.
"The deleveraging plans being pursued will ensure that the group will be well placed in the mining services sector to benefit from any upturn and opportunities that arise in the mining industry," Ausdrill said.
The expected weaker performance in fiscal 2014 is due to a reduction in mining production volumes, subdued exploration activity and a surplus of mining equipment hire in the sector.
A reduction in capital spending, weakness in some commodities prices and a delay in the commissioning of rigs would also affect the business.
"The first half result will be lower than the second half due to the effect of contracts ceasing with the impact of any new work not taking effect until 2014," the company said.
The forecast excludes the effects of significant items and the impact of any fluctuation in the value of the Australian dollar.
Still, Ausdrill says, it remains comfortably within its debt covenants as it focuses on strengthening its business in Australia and Africa by providing specialist drilling services, restricting capital expenditure and reviewing costs.
In April, Ausdrill downgraded its earnings forecast for the 2012/13 financial year due to weaker commodities prices.
It made a net profit of $90.4 million in the year to June 2013, down 19% from the previous year, due to one-off expenses and tax regimes in Mali and Tanzania.
But, in August, Ausdrill gave an upbeat assessment of its prospects despite a downturn in mining sector investment, predicting it would weather those conditions and secure new work.
Ausdrill provides services including drill and blast, exploration, procurement and logistics in Australia, the United Kingdom and Africa.
Several other mining services companies have downgraded earnings forecasts this year, including WorleyParsons.