Mining services group Ausenco (AAX) saw its shares sold off by more than 30% yesterday after it joined the downgrade club with a possible earnings downgrade of 25% to more than 30%.
Like so many of its peers in the sector, Ausenco is having trouble meeting guidance as clients cancel, curtail or simply walk away from previously arranged contracts. Coffey International is another company in the industry which has complained of this activity by clients.
At the same time, there’s a dearth of new business as big mining companies cut spending and take work in-house, or simply postpone it.
Ausenco says it is now looking to increase its workload in oil and gas and in North American oil sands to try and offset the impact of the slowdown in mining.
As a result Ausenco directors cut their first-half earnings estimates and and warned on its full-year performance. The company has a calendar financial year.
Ausenco shares were down 31% at the close at $1.485.
AAX YTD – Ausence hit by revenue, earnings downgrade from sliding mining sector
In the update lodged with the ASX yesterday morning, the company said its second-quarter performance had been adversely impacted by extraordinary costs associated with right-sizing the business to maintain sustainable longer term margins.
It said it expects to unveil first-half revenues of $255 million, underlying earnings before interest, taxation, depreciation and amortisation (EBITDA) of between $15 and $16 million and underlying net profit after tax between $6 and $7 million.
As a result, Ausenco said it expects its full-year results to come in well below current market consensus levels of revenues between $564 million and $661 million and reported net profit after tax between $29 million to $41 million.
That is down on the profit guidance of $37million to $42 million given in an earlier update issued in May.
"Ausenco is currently completing the review of its full year 2013 business performance and will provide an update on anticipated full year performance in late August 2013," the group said.
Among problems hitting the sector were that clients were cutting capital expenditure programs, announcing large asset write downs and programs to dispose of non-core or under performing assets”, Ausenco said. Companies large and small, from Rio Tinto, to BHP Billiton, Newcrest, Anglo American, Vale, Barrick, Newmont and a host of competitors are doing this.
