Yet another downgrade from drilling contractor Boart Longyear (BLY) and of course that sent the shares lower. It was the second warning in six weeks after the company cut its 2013 earnings forecasts at the AGM in Adelaide in late May.
Yesterday it revealed that conditions in the mining industry have softened further than they appeared in May, so another cut is in the offing.
As a result, the shares ended with a loss of more than 7.3% at 63c as investors took note of the gloom in the update which strongly suggested that the company sees no sign of an end to the slide in demand for its drilling services.
BLY YTD – Shares plunge to 4-year low
The company was part of the extensive round of downgrades issued by companies in the mining services sector in late April and May and into early June. The other companies included Coffey International, Cardno, WorleyParsons and ALS (the old Campbell Brothers).
With Boart Longyear now issuing a second downgrade, the question some analysts have raised is whether some of the other companies in the sector will follow their earlier downgrades with new cuts of their own.
In the update, it told investors that earnings and revenue forecasts for calender 2013 should be cut further.
"Customers for drilling services also continue to announce reductions or delays in their drilling programs, capital expenditures and overhead costs, which have resulted in continuing uncertainty about the levels at which drilling activity will stabilise," the Boart statement said, adding that the full-year outlook at the AGM no longer appeared to reflect current and expected market conditions.
In its May update the company told shareholders that it saw earnings around $US200 million ($A220.2 million) for calendar 2013, which was down on the $US254 million it made in 2012.
But on Monday, Boart Longyear said conditions had worsened since the May 21 AGM in Adelaide.
"Market conditions have continued to soften since the update provided at its annual general meeting in May, particularly with respect to its drilling services business," Boart said in a statement.
It added that drilling take-up rates had fallen, as competitors also lost mining exploration.
Now current analyst expectations ranged from $1.36 billion to $1.56 billion for full-year revenue and from $176 million to $211 million for EBITDA.
But it expected 2013 full-year revenue and EBITDA to fall below these ranges, due to persisting industry volatility.
The company also said it had amended several key terms of its bank debt facility, which took effect last Saturday (June 29) for additional financial flexibility.
Late last year, the company replaced its CEO and started slashing costs (and both exploration and mining spending). Boart’s half-year results are due to be released on August 26. Then we will probably get a better estimate for the full year.
