Boart Longyear, the world’s leading provider of drilling services, drilling equipment, and performance tooling for mining and drilling companies globally, is often considered a key barometer of health for the mining industry and mining-related capital investment. Today, it released its annual results, which delivered the third profit downgrade in four months and warned of deteriorating operating conditions:
Operating conditions and key performance indicators have continued to deteriorate early in the second half of the year and are similar to levels experienced during the previous market downturn in 2009. As a consequence, the Company expects its second-half 2013 result to be lower than the adjusted result for the first half despite the benefit of restructuring initiatives. The Company believes market expectations may not adequately reflect the risk of price erosion in the second half and may assume larger benefits in 2013 from the Company’s cost reduction efforts than are likely to be achieved. Current analyst EBITDA expectations for 2013 range from US$116 million to US$159 million. Analyst estimates at the low end of the range appear to be consistent with the Company’s current view for the full year, but significant industry volatility in the second half could materially impact performance.
Richard O’Brien, the Company’s President and Chief Executive Officer, commented on the first-half 2013 results, stating, “Our operating performance and the restructuring and impairment charges we took during the first half reflect the very challenging conditions in our markets since the beginning of 2013. The magnitude and velocity of the market’s contraction during the year has surprised many people in the industry. While we continue to be challenged in implementing cost reductions quickly enough to keep pace with the market’s decline, we are taking aggressive steps to control costs.
It its results presentation, Boart Longyear shows a declining pipeline of activity:
Failling drilling utilisation rates:
And a falling customer backlog:
All of which points to significantly weaker mining activity in the period ahead.
unconventionaleconomist@hotmail.com
