Some of Australia’s industrial success stories of the past decade are losing their gloss as the global credit crunch and recession hits industries and regions in Australia and across the globe.
Very few sectors are being spared the damage: transport, resources, basic industry, media, retailing and property and services.
Some of the damage has been evident in the past year, but as we slump deeper into the slowdown, and some of our export markets face renewed pressure, the damage bill is mounting.
That this week’s list of major corporate announcements which revealed the damage.
Qantas revealed a slump in earnings (that would have been a loss except for a convenient accounting change), 1750 job cuts, plane sales, delays to purchases, capex cuts and other cost savings moves.
Yesterday OneSteel, the country’s second biggest steelmaker and part of the old BHP Steel business (along with rival BlueScope), revealed a near halving in expected profits for 2009, a capital raising of more than half a billion dollars.
It didn’t mention job cuts or other moves, but the fine print of the announcement warned of "substantial" restructuring costs to come and possible "impairment charge" charges that could not be given at the moment.
And that will mean jobs will have to go at its blast furnace and iron ore mining operations at Whyalla in South Australia, at its electric arc furnaces in Melbourne and a similar operation in Sydney at Rooty Hill.
Leighton Holdings, the country’s dominant civil engineer and contractor, has dumped its second huge construction project in the faltering Gulf state of Dubai in three months as the country suffers from a collapse in building and credit.
Iluka, the world’s biggest beach sands minerals miner and exporter (rutile, zircon) revealed a 70% plunge in third quarter sales revenues and a near 24% fall in output as the slump in global industrial production slashed demand for paint and titanium and other products made from its products.
And PMP, the struggling Melbourne- based printer is sacking another 67 people, this time in Victoria, on top of the 86 sacked in Queensland and Adelaide a month ago.
It also warned that its second half result would be worse than the first half drop in profit of more than 30%. The company said the sackings would cost an extra $4.5 million.
In each case there’s a direct link to the dual effects of the credit crunch and then the recession which is cutting demand for a wide range of products, from property, to travel, steel, cars, planes, coal, iron ore and so on.
PMP shares dropped 2 cents to 56 cents yesterday.
OneSteel is Australia’s second largest steelmaker and on the indications of the past two days, it’s not being run very well.
Tuesday the company asked for a trading halt to allow it time to make a statement on its financial position; this morning that statement came, a profit downgrade and talk of cuts and other moves to lower costs.
But compared to the announcement that Qantas trotted out on Tuesday morning, the OneSteel halt was light on detail.
You were left wondering if the board and management were asleep and suddenly awoke on the first trading day after Easter to discover the cupboard was bare and there was less in the bank account.
Qantas managed, unfortunately for those involved, to detail job losses of up to 1750 in management and staff through attrition etc and changing working hours, plus scrapping capacity, grounding plans, cutting capital spending and a series of other cost cuts.
OneSteel Ltd, slashed full year profit forecasts to "about $200 million" from the range of $350 million to $375 million.
Seeing it earned $215 million in the first half, it will be lucky to break even this half. It is seeking to raise at least $559 million.It could raise over $800 million if retail shareholders subscribe heavily, but that’s not expected to happen.
The issue is not underwritten.
As Qantas has shown, the first downgrade isn’t the last as financial and business conditions worsen.
OneSteel reckons it will see an improvement in the 2010 financial year: it might, but its not estimating a figure for earnings
"The revised earnings guidance reflects significantly lower than anticipated sales and margins in the month of March.
"In light of the current environment, OneSteel has reduced earnings expectations for the remainder of this financial year."
The company also launched a capital raising to raise at least $559 million at $1.80 a share, 30% under the $2.56 close before Easter.
The shares were in a trading halt yesterday.
And will rival BlueScope return to the market?
Leighton said it had withdrawn from a $2 billion project in Dubai.
The company said its Al Habtoor Leighton joint venture in Dubai group and its partners Murray & Roberts and Takenaka had come to a mutual agreement with the Dubai Department of Civil Aviation (DCA) to withdraw from a contract to build the Dubai Airport Concourse 3.
The joint venture was awarded the contract, worth $800 million to Leighton, in December last year, and has up until now been working with the DCA to finalise its terms.
Al Habtoor Leighton and its partners have already completed the Dubai Airport terminal 3 and Concourse 2.
The airport had struggled to raise money in a recent funding move and the Dubai Government had to tip in $US365 million into the $US1 billion issue last week to finalise the rollover of a debt facility.
The withdrawal from the project would not have any material impact on the Al Habtoor Leighton group’s 2009 results, the company said.
In February, Al Habtoor Leighton and Murray and Roberts withdrew from the $2.9 billion Trump project (with near broke US property and casino player, Donald Trump).
Al Habtoor Leighton a
