03/12/2008 - 11:15

Boart cuts costs ahead of tough year

03/12/2008 - 11:15

Bookmark

Save articles for future reference.

Mining services provider Boart Longyear has further revised its earnings guidance for 2008 and says the year ahead will be challenging.

Mining services provider Boart Longyear has further revised its earnings guidance for 2008 and says the year ahead will be challenging.

The US-based company said it expects revenue in the 12 months to December 31 to be 18 per cent higher than in the prior year, down from earlier guidance of 22 per cent revenue growth.

"There's two reasons for that," Boart Longyear president and chief operating officer Craig Kipp told a conference call.

"One is the dramatic change in the dollar around the world, particularly the Canadian dollar and the Australian dollar.

"And there has been a downturn in our sales profile in our products business."

Boart's drilling services business remained strong despite 15 per cent of rigs being idle, Mr Kipp said.

Boart's earnings before interest, tax, depreciation and amortisation (EBITDA) margin would remain unchanged at 22 per cent higher, before restructuring charges, the company said.

"The 2009 visibility is challenging, there's no question about it," he said.

"But we're not waiting to get firm contracts from our customers or to see where this goes. We've identified cost savings, we're reducing (capital expenditure), dividend policy is under review and we will generate a lot of cash as we work on our networking capital."

Boart has already cut 500 positions from its workforce in its drilling services and products divisions, with more to be announced by the end of the year through rationalisation of the company's manufacturing capacity and administration.

The company currently employs nearly 0,000 people worldwide.

Restructuring charges associated with the changes would be between $US10-20 million in 2008, the company said.

Chief financial officer Joseph Ragan said the board was considering reducing or eliminating its dividend policy.

"We feel it prudent to consider all our options in an environment that so highly values liquidity," he said.

Total liquidity would be approximately $US85 million at the end of 2008, while outstanding net debt would be reduced by up to $US150 million in 2009 through lower capital spending and a reduction in net working capital, the company said.

Acquisition activity would also be scaled back to smaller, strategic purchases, Mr Kipp said.

"We've given it a lot of thought. This is not a surprise to us, and we're moving very confidently ahead into this market for the next 12 to 24 months," he said.

At 1032 AEDT, Boart Longyear shares were up 1.5 cents, or 6.38 per cent, at 25 cents.

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

Subscription Options