Jobs go as Boart Longyear feels pain
Chief executive Richard O'Brien told shareholders at the company's annual meeting that Boart's earnings would be at the lower end of analysts' forecasts - which have already been slashed repeatedly as sentiment continues to worsen.
"The downturn in capital and exploration spending in the mining sector globally has clearly reduced the demand for drilling services and products," he said in Melbourne on Tuesday.
It came on the same day contractor Transfield Services saw its share price crunched by 24 per cent after a sharp dive in profits forced it to axe 113 jobs.
Contracting giants UGL and WorleyParsons, and smaller players including Sedgman, Fleetwood and Ausdrill, have also provided profit warnings in recent weeks.
The more than 1000 jobs to have gone since the start of the year means Boart has now shrunk its global workforce by more than 3000, or about 30 per cent.
But despite the heavy-handed cuts, Mr O'Brien said further cost cuts remained high on the agenda as conditions worsen.
"With market conditions where they are, we're focusing our efforts on what we can control: total costs," Mr O'Brien said.
Utilisation rates for Boart's drilling rigs could fall as much as 20 per cent compared to last year, the company said. Contractors tend to scale their workforce up and down swiftly in reaction to meeting market demand.
The run on the sector has become so predictable that Boart shares actually spiked briefly on Tuesday in reaction to its market update, with some relieved that things weren't even worse than they had feared.
But shares in Boart ended the day 0.5¢ lower at 78¢. The stock has lost two-thirds of its value in the past three months, almost reminiscent of the savaging it received during the financial crisis.
The Utah-based, Australian-listed driller said revenue would come in at the lower end of analysts' forecast range of between $US1.466 billion and $US1.726 billion. Earnings before interest tax, depreciation and amortisation (EBITDA) would likely come in at the lower end of between $US199 million and $US271 million, it said.
Both would be down dramatically compared to the $US2.01 billion in revenue and adjusted earnings of $US322 million reported last year.
While Boart's debt has risen from $US554 million in February to $US585 million, it said it expected it to fall back to between $US400 million to $US450 million by the end of the year.
During formal proceedings at the annual meeting, a resolution to endorse the company's executive remuneration suffered a protest vote of 12 per cent.
Frequently Asked Questions about this Article…
Boart Longyear says the global downturn in capital and exploration spending in the mining sector has reduced demand for drilling services and products, forcing it to cut more than 1,000 jobs worldwide. CEO Richard O'Brien said the company is focusing on controlling total costs as market conditions worsen.
Since the start of the year Boart has cut over 1,000 jobs, bringing its total reduction to more than 3,000 employees — about a 30% shrink in its global workforce. For investors, this highlights how quickly contractors scale staffing to match volatile mining demand and signals management is aggressively cutting costs to protect cash flow and margins.
Boart said revenue is likely to be at the lower end of analysts' forecasts between US$1.466 billion and US$1.726 billion, and EBITDA is expected at the lower end of US$199 million to US$271 million. That compares to last year's US$2.01 billion in revenue and adjusted earnings of US$322 million — a dramatic decline year-on-year.
Shares briefly spiked on the market update — some investors were relieved it wasn't worse — but closed the day 0.5 cents lower at 78 cents. The stock has lost about two-thirds of its value in the past three months, reflecting the severity of the sector downturn.
Boart's debt rose from US$554 million in February to US$585 million, but management expects debt to fall back to between US$400 million and US$450 million by the end of the year, suggesting planned deleveraging if conditions and cost cuts proceed as intended.
Yes. The article notes Transfield Services saw its share price fall 24% after a sharp profit dive and cut 113 jobs. Major contractors such as UGL and WorleyParsons, and smaller players including Sedgman, Fleetwood and Ausdrill, have also issued profit warnings in recent weeks.
Key metrics to monitor are rig utilisation (Boart warned utilisation could fall as much as 20% versus last year), quarterly revenue and EBITDA relative to analyst ranges, debt reduction toward the US$400–450 million target, and the pace of further cost cuts or workforce changes.
At the annual meeting a resolution to endorse executive remuneration faced a protest vote of 12%, indicating some shareholder dissatisfaction with pay decisions amid the difficult trading environment and significant job cuts.
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