Seven takes earnings hit as WesTrac slashes jobs
Seven Group lowered its earnings guidance again on Tuesday as the slowdown in mining services hit its WesTrac business, which announced plans to cut 630 staff.
The staff reductions, to be implemented in the next month, will cost $13 million and come in addition to 375 redundancies announced earlier this year at a cost of $8 million.
"WesTrac has implemented a series of efficiency and productivity initiatives over the past twelve months in an effort to streamline its cost base, but these measures alone have not been sufficient in view of continuing challenging market conditions," Seven Group said in a statement.
Seven said it expected overall full-year underlying earnings to be at the lower end of its previous guidance of 30 per cent to 40 per cent below the previous year, "with a more marked reduction in the first half given the record comparative first half".
In June, Seven slashed 350 jobs as a result of its WesTrac mining and construction equipment business encountering "challenging market conditions".
Seven's shares were dumped in August following an earnings downgrade when it said WesTrac was being dragged down by falling commodity prices and a subdued coal sector.
This time last year it was the WesTrac business in China that was attracting concern, but in Australia WesTrac reported a record result for the 2011-12 financial year and accounted for more than 66 per cent of the company's earnings.
The sale of Seven's $491 million stake in Consolidated Media Holdings to News Corp last year further skewed the company's business towards industrial services, which provide about 80 per cent of its earnings. This includes earnings from its 45 per cent stake in equipment hire firm Coates Hire.
Seven also owns a 35 per cent stake in Seven West Media, which owns the market-leading Seven network and The West Australian newspaper. The company's shares closed 12¢ lower at $7.59 on Tuesday.