Engineers feel squeeze on slowdown
Coffey International has downgraded earnings as the slump in exploration spending bites, amid more bad news in the resources sector, this time with a round of job cuts in the NSW coal industry and in the West Australian gold sector.
The warning came as Downer EDI cut 106 jobs at Japanese oil trader Idemitsu's Boggabri coalmine in north-western NSW following production cuts because of weak thermal coal prices.
Just last month, Whitehaven axed 40 jobs at its mines nearby.
Additionally, Tanami Gold is to cut up to 150 jobs in Western Australia as it puts its Coyote goldmine on "care and maintenance" following the gold price slump, which has left the high-cost operation exposed.
On Wednesday, Coffey flagged a second-half pre-tax profit that would fall short of the $23.7 million earnt in the December half.
Previously it had said the second-half pre-tax profit would at least match the earnings of the previous half. It blamed the recent downturn in commodity prices, which is pressuring Coffey's turnaround prospects, although it is not yet clear whether this has now been derailed.
"Market conditions have deteriorated significantly in recent weeks with commodity prices, particularly gold, falling sharply," it told investors on Wednesday.
"This has been accompanied by some broader loss of business confidence in the Australian market."
Earlier in the week, mine services group Imdex blamed weak demand from the mining sector for a 17 per cent slide in March-quarter revenue, although the impact was partly offset by continuing buoyancy in its oil services division.
The decline in commodity prices, especially the recent slump in the gold price and the steady slide in the price of copper amid mounting concern over the global growth outlook, has prompted mining companies and explorers to conserve cash.
Coffey's Australian geosciences and projects businesses were experiencing an increasing number of project delays, the company said.
"As a result, it is now unlikely that the company will achieve its previous market guidance of an H2 EBITDA [earnings before interest, tax depreciation and amortisation] performance that equals or exceeds the H1 result."
At the same time, analysts on Wednesday were downbeat over the outlook for Boart Longyear, a drilling services operator, with Citi telling clients that Boart shares could be worth only around 68¢ if commodity prices fell 10 per cent, which would translate into a 40 per cent slump in revenues.
Coffey shares closed down 10.5¢ at 19.5¢. Imdex fell another 4¢ to 96¢ as Boart Longyear edged ahead 2.5¢ to 94¢.