Drilling company Boart Longyear has slashed its full-year earnings forecasts as the mining sector continues to soften.
In a statement to the Australian Securities Exchange, Boart said its drilling services customers continue to announce reductions or delays to their drilling programs resulting in increased uncertainty about the levels at which drilling activity will stabilise.
"Accordingly, the assumptions upon which the company’s 2013 full-year outlook at the AGM were based no longer appear to reflect current market conditions," the company said.
It said current analyst expectations ranged from $1.36 billion to $1.56 billion for full-year revenue and from $176 million to $211 million for earnings before interest, tax, depreciation and amortisation (EBITDA).
"The company believes expectations for 2013 full-year revenue and EBITDA should be reduced below these ranges given the significant industry volatility that persists at present," Boart said.
In May Australian Mining reported Boart slashed over 1000 jobs across its global operations.
Chief executive Richard O'Brien at the time warned investors that the company expects a sharp drop in profits, which have already been repeatedly revised down as industry sentiment continues to decline.
"The downturn in capital and exploration spending in the mining sector globally has clearly reduced the demand for drilling services and products,'' he said.
Despite company wide cuts which will see Boart’s global workforce shrink by about 30 per cent, O’Brien said investors should expect further belt-tightening as conditions worsen.
"With market conditions where they are, we're focusing our efforts on what we can control: total costs,'' O'Brien said.As miners cut exploration budgets, Boart has predicted utilisation rates for its drilling rigs could fall as much as 20 per cent compared to last year.
Some analysts report exploration expenditure this year has dropped 20 per cent. “Our primary objectives in the short and medium term are to deliver improved margins and cash flow by creating a more a sustainable cost structure,” O’Brien said in May.