By Rhiannon Hoyle
SYDNEY--Mining services provider Boart Longyear Ltd. (BLY.AU)
Monday reported a 57.4% slump in full-year profit as it was
buffeted by a slowdown in minerals exploration, which led it to cut
more than 2,000 jobs recently.
Boart--the world's largest supplier of drilling services and
products to the resources industry--also appointed Richard O'Brien
as its new president and chief executive following a challenging
year that saw repeated profit warnings, a sharp fall in its share
price and the ouster of previous boss Craig Kipp. Mr. O'Brien is a
former chief executive of gold miner Newmont Mining Corp.
(NEM).
Boart said its net profit for the year through Dec. 31 totaled
US$68.2 million, down from US$160 million a year earlier. Costs
tied to the Utah-based company's global restructuring, which
included the closure of a manufacturing plant in Western Australia
state, dragged down earnings by US$68 million.
Boart has come under pressure as some of the world's largest
resources companies trimmed their capital expenditure budgets. At
the same time, concerns over the outlook for commodity prices and
demand put a squeeze on margins.
Companies like Rio Tinto PLC (RIO) and BHP Billiton Ltd. (BHP)
have been forced by weaker prices to slash costs, including
reducing spending on exploration and postponing new mines, after
years of heavy investment in expanding mines. Rio last week swung
to its first full-year loss, and is chasing more than US$5 billion
in savings by the end of next year.
"The global outlook for mining services remains uncertain," said
David McLemore, Boart's chairman and interim chief executive, said
in a statement.
"However, our key indicators of rig utilization and the order
backlog for drilling products which includes drilling equipment and
performance tooling have stabilized," he added.
Boart's earnings before interest, tax, depreciation and
amortization, or Ebitda, came in at US$322 million. Its most recent
guidance was for earnings of US$310 million-US$320 million, and had
as recently as last May been forecasting full-year Ebitda of US$460
million.
The company slashed its final dividend to 1 U.S. cents a share,
from 5.6 cents a share in 2011.
Reports of a slowdown were echoed by mining and energy services
company WorleyParsons Ltd. (WOR.AU), which last week said
Australian market conditions had deteriorated in the second half of
2012.
In December, Boart announced it had cut US$70 million of
overhead costs from the business in a three-month period, and had
reduced its global headcount by 2,200 since mid-year. The company
also decided to relocate its manufacturing operations in Perth,
Western Australia, mostly to an existing facility in Poland as part
of its cost-cutting exercise.
"Looking to 2013 all indications show that conditions across our
key market segments have stabilised and the revenue run-rate over
2013 will largely mirror the second half of fiscal 2012," Mr.
McLemore said.
Boart expects capital expenditure this year to total US$50
million, with more costs likely stripped out of the business in the
January-to-June period.
Write to Rhiannon Hoyle at rhiannon.hoyle@wsj.com
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