Earnings hit despite Boart cost-cutting
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 that it had appointed Newmont Mining's Richard O'Brien as its next chief executive. The appointment followed 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 share price last year.
The company said its revenue and earnings for the coming year were likely to come in line with analyst expectations of $US1.7 billion and $US258 million respectively, but shares in Boart fell 17.5¢, or 8 per cent, to $1.965 on Monday on the back of the lacklustre result and uncertain guidance.
"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." He 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 revenue of $US2.01 billion.
Earnings before interest, tax, depreciation and amortisation were down 29 per cent to $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 2013.
Shares in Boart halved in a space of a week to a post-financial crisis low of $1.09 last September after it provided alarming earnings guidance amid fears 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 that current director Barbara Jeremiah will succeed Mr McLemore as chairman on March 1. Mr McLemore will remain on Boart's board.