From the AFR:
Kerry Stokes’ Seven Group Holdings will lay off 630 staff from its WesTrac mining equipment business and has issued another profit warning as it comes to terms with slowing activity in the mining sector.
No real surprise here given Caterpillar’s ongoing problems. To give you an idea of how far orders of heavy equipment have fallen, recall the discussion between Alan Kohler and Downer EDI CEO Grant Fenn on the weekend:
GRANT FENN, CEO, DOWNER EDI: Alan, look, for the last 12 months we’ve been working with the mining companies, particularly around their cost base. We’re obviously a large part of their supply base, supply chain. So we’ve been working with them pretty proactively to reduce their costs.
But we’ve noticed this in the last 12 months. In the locomotive business, which is we provide locomotives for the mining industry; we’ve seen really orders drop off considerably and demand drop off. Now, it’s all about I think the miners with their volumes, but it is also with the operators becoming better at managing their assets, so we’ve got a small lull, I think, in the market for a period until that gets soaked up. At this point, certainly offer the next 12 months, we don’t see much changing in that.
ALAN KOHLER: When you say drop off considerably, how much, what sort of percentage are we talking about?
GRANT FENN: In the heady days, three years ago, we were building around 55 to 60 locomotives a year. At the moment there’s no orders for locomotives at this point.
ALAN KOHLER: I’d call that considerable.
GRANT FENN: Yes.
ALAN KOHLER: To zero.
GRANT FENN: It is considerable.
This is just the beginning. The next wave will be from the projects themselves.
