Ausdrill warns on soft market
The slump in resource sector spending has finally caught up with contract driller Ausdrill, which is preparing to downgrade earnings expectations for the year ahead.
The company suspended trading in its shares on Tuesday as it warned of "ongoing challenging market conditions, which are weaker than expected".
Accordingly, the company intends to provide the market with a trading update on Wednesday.
It joins others in the sector such as Boart Longyear and Imdex which warned of a prolonged and severe downturn and resulted in the share prices of both companies falling sharply. Ausdrill's share price has fared better, until now at least, thanks to less bearish statements by management on its prospects.
When releasing its year-to-June results, for example, Ausdrill pointed to the softer spending by smaller resources companies, while highlighting its long-term contracts with a number of clients along with a series of measures aimed at consolidating cash and reducing costs.
In the year to June, Ausdrill's net profit declined just 7 per cent to $100 million with revenues buoyed largely by the acquisition of the Best Tractor Parts business in November 2012.