Cost-cutting fails to halt Boart's slump
DRILLING services provider Boart Longyear says the global outlook for mining services remains uncertain, after an aggressive cost-cutting campaign failed to prevent a sharp slump in its full-year earnings.
The Utah-based and Australian-listed group also announced it had appointed Newmont Mining's Richard O'Brien as its next chief executive, following Craig Kipp's abrupt departure in October after a plunge in commodity prices and mining activity sparked a more than 75 per cent fall in the company's share price last year.
The company said its revenue and earnings for the coming year was likely to come in line with analyst expectations of $US1.7 billion ($1.65 billion) and $US258 million, respectively, but shares in Boart fell 17.5¢, or 8 per cent, to $1.965 on Monday after the lacklustre result.
"The global outlook for mining services remains uncertain," interim chief executive David McLemore said. "However, our key indicators of rig utilisation and the order backlog for drilling products ... have stabilised." Mr McLemore said management had saved about $US70 million by cutting the equivalent of 20 per cent of its global overheads to improve margins, including by making 2200 of its staff redundant.
"The company's work to restructure the cost base means we are very well positioned to benefit from any pick-up in mining activity this year," he said.
Boart reported a 58 per cent drop in net profit to $US68.2 million on flat revenues of $US2.01 billion.
Earnings before interest, tax, depreciation and amortisation was down 29 per cent at $US254.3 million, from $US356.3 million last year, with the biggest hit coming from a 19 per cent fall in the sales of drilling products.
Boart cut its final dividend from US5.6¢ to US1¢ a share, payable on April 12, bringing the full-year dividend to US7.4¢.
Mr McLemore said Boart expected to extract more costs from the business in the first half of this year.
Shares in Boart halved in the space of a week to a post-financial crisis low of $1.09 last September after it provided alarming earnings guidance amid fears that a sharp plunge in commodity prices would cripple mining exploration.
But Mr McLemore said the prospects for the global mining sector over the medium to long term remained "very strong".
"A key focus over the near term will be reviewing processes across the business, leading to a cost and debt structure that is more resilient to down cycles," he said.
Mr O'Brien, who has served as Newmont's chief executive for six years, will start work at Boart next month after finishing his contract with the world's second-largest gold miner.
Boart also announced current director Barbara Jeremiah will succeed Mr McLemore as chairman on March 1. Mr McLemore will remain on Boart's board.