Seven to shed 630 jobs at WesTrac

The slowdown in the mining services sector has hit Seven Group's WesTrac business, which outlined plans to axe a further 630 staff.

The slowdown in the mining services sector has hit Seven Group's WesTrac business, which outlined plans to axe a further 630 staff.

The cut, to be carried out in the next month, will cost $13 million and take total staff cuts this year to a little over 1000, underscoring the pain being felt in the mining services sector.

WesTrac, which operates the regional franchise for Caterpillar-branded earth moving equipment, joins others including Boart Longyear and Macmahon Holdings in slashing staff as the mining industry down-shifts from its boom conditions.

While the export volume of bulk commodities such as coal and iron ore have held up in recent months, caution over the longer term outlook for Chinese and global demand is clouding the sector.

At the same time, the low level of capital raised by junior explorers, which has remained depressed for several years now, is forcing them to curtail spending. The majors, too, are harbouring cash.

As part of this, many miners and explorers are likely to have a prolonged shutdown over the year-end period, as part of their efforts to conserve cash.

Earlier this year the Kerry Stokes-chaired Seven outlined 375 redundancies also in its WesTrac business at a cost of $8 million. Seven Group lowered its earnings guidance again on Tuesday for the latest round of cuts.

"WesTrac has implemented a series of efficiency and productivity initiatives over the past 12 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 now expects overall full-year underlying earnings to be at the lower end of its earlier guidance of 30 to 40 per cent below the previous year, "with a more marked reduction in the first half" given the record previous corresponding period.

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 WesTrac's 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.

Even so, analysts have warned Caterpillar's new sales are expected to come under pressure over the next year thanks to an oversupplied market for heavy mining equipment.

The mining services industry was on a growth trajectory back in 2010 when Mr Stokes sold his private company WesTrac into his listed Seven Group entity.

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. The company's shares closed 12ยข lower at $7.59 on Tuesday.

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