Ausdrill stock hammered after profit downgrade
A benign set of results from BHP Billiton and a steadying gold price were not enough to stop the rot, as most stocks across the gold, iron ore, copper, uranium and petroleum sectors lost ground.
The biggest hit was worn by mining services provider Ausdrill, which fell by 9 per cent because of a 15 per cent profit downgrade for the year to June 30.
Ausdrill blamed a "general slowdown in activity" that was particularly evident in mining exploration and equipment hire. The company now expects its full-year profit to be as low as $90 million, despite predicting it would be at least $112 million just two months ago.
Ausdrill has already shed more than 300 jobs - about 13 per cent of its workforce - and more job losses could be on the way after it said it would review cost structures including "employee numbers".
Mining companies are increasingly demanding lower costs from contractors.
Atlas Iron managing director Ken Brinsden also noted that contractors were taking a more "pragmatic" approach to pricing since the mining slowdown.
"We have seen an increased level of flexibility, let's put it that way, from the contractor base," he said.
BHP has retained full-year production guidance for its most important divisions - iron ore, petroleum and copper - despite reporting March-quarter results that were affected by bad weather in the Pilbara, Queensland and the Gulf of Mexico.
While the results were slightly below some expectations, most analysts said they were unlikely to alter full-year profit estimates, and BHP shares closed 9¢ lower at $32.06.
RBC Capital is predicting BHP's earnings before interest, depreciation and tax will fall about 12 per cent below last year's to just under $US30 billion.
Atlas, meanwhile, continues to be punished by investors, who have wiped 48 per cent off the company's value over the past two months.
Much of that has been based on forecasts that iron ore price would soon plummet because of increased supply from new mines.
But the benchmark iron ore price has lost only 12 per cent since February, and it averaged a healthy $US148 a tonne during the March quarter.
Mr Brinsden said the outlook for iron ore exporters was better than most people realised, and he accused the market of a "gross overreaction to the negative".
Despite confirming it was still on track to deliver its full-year production targets, Atlas shares fell by a further 5 per cent, or 5¢, to a four year low of 96¢.
Gold may have been the big loser of the week, but it steadied on Wednesday and traded in a range between $US1340 and $US1400 an ounce.
Frequently Asked Questions about this Article…
Ausdrill shares fell about 9% after the company downgraded full-year profit by 15% for the year to June 30. Ausdrill now expects profit could be as low as $90 million, down from a previous forecast of at least $112 million two months earlier, citing a general slowdown in mining exploration and equipment hire.
Yes — Ausdrill has already cut more than 300 roles, roughly 13% of its workforce, and said it will review cost structures including employee numbers. For investors, job cuts can reduce costs and protect margins but also signal weaker activity in the mining services sector, so they should monitor future guidance and contract wins.
The article says mining activity is slowing, so miners are pushing contractors for lower prices. Atlas Iron's managing director noted contractors have become more pragmatic and flexible on pricing due to the slowdown, which can pressure margins for mining services companies.
BHP reported a generally benign March-quarter, despite some weather disruptions in the Pilbara, Queensland and the Gulf of Mexico. It retained full-year production guidance for iron ore, petroleum and copper. While results were slightly below some expectations, analysts said they were unlikely to change full-year profit estimates; BHP shares closed about 9¢ lower at $32.06.
Atlas Iron has been heavily punished by investors, losing about 48% of its value over two months. Much of the sell‑off was driven by forecasts that iron ore prices would plunge from new supply. However, the benchmark iron ore price had only fallen about 12% since February and averaged US$148 a tonne in the March quarter, and Atlas says it's still on track to meet full‑year production targets.
The article notes the benchmark iron ore price has declined about 12% since February but averaged a healthy US$148 a tonne in the March quarter. For investors, iron ore price stability or strength supports miners' revenue and can mean that some market sell‑offs may be an overreaction to negative forecasts.
Gold steadied on Wednesday, trading in a range between US$1,340 and US$1,400 an ounce. While gold had been one of the worst performers that week, the price stabilization suggests short-term calm — investors should watch whether this range holds as an indicator of market sentiment.
Mining and resource stocks broadly suffered, with losses across gold, iron ore, copper, uranium and petroleum sectors despite some steadying results. Everyday investors should watch company profit guidance, production targets, contractor pricing trends, cost‑cutting measures (like job cuts), and commodity price movements as signals of sector health.
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