Boart Longyear Profit Falls 57%, Names Richard O'Brien as CEO

   By Rhiannon Hoyle 
 

SYDNEY--Mining services provider Boart Longyear Ltd. (BLY.AU) Monday reported a 57.4% slump in full-year profit as it was buffeted by a slowdown in minerals exploration, which led it to cut more than 2,000 jobs recently.

Boart--the world's largest supplier of drilling services and products to the resources industry--also appointed Richard O'Brien as its new president and chief executive following a challenging year that saw repeated profit warnings, a sharp fall in its share price and the ouster of previous boss Craig Kipp. Mr. O'Brien is a former chief executive of gold miner Newmont Mining Corp. (NEM).

Boart said its net profit for the year through Dec. 31 totaled US$68.2 million, down from US$160 million a year earlier. Costs tied to the Utah-based company's global restructuring, which included the closure of a manufacturing plant in Western Australia state, dragged down earnings by US$68 million.

Boart has come under pressure as some of the world's largest resources companies trimmed their capital expenditure budgets. At the same time, concerns over the outlook for commodity prices and demand put a squeeze on margins.

Companies like Rio Tinto PLC (RIO) and BHP Billiton Ltd. (BHP) have been forced by weaker prices to slash costs, including reducing spending on exploration and postponing new mines, after years of heavy investment in expanding mines. Rio last week swung to its first full-year loss, and is chasing more than US$5 billion in savings by the end of next year.

"The global outlook for mining services remains uncertain," said David McLemore, Boart's chairman and interim chief executive, said in a statement.

"However, our key indicators of rig utilization and the order backlog for drilling products which includes drilling equipment and performance tooling have stabilized," he added.

Boart's earnings before interest, tax, depreciation and amortization, or Ebitda, came in at US$322 million. Its most recent guidance was for earnings of US$310 million-US$320 million, and had as recently as last May been forecasting full-year Ebitda of US$460 million.

The company slashed its final dividend to 1 U.S. cents a share, from 5.6 cents a share in 2011.

Reports of a slowdown were echoed by mining and energy services company WorleyParsons Ltd. (WOR.AU), which last week said Australian market conditions had deteriorated in the second half of 2012.

In December, Boart announced it had cut US$70 million of overhead costs from the business in a three-month period, and had reduced its global headcount by 2,200 since mid-year. The company also decided to relocate its manufacturing operations in Perth, Western Australia, mostly to an existing facility in Poland as part of its cost-cutting exercise.

"Looking to 2013 all indications show that conditions across our key market segments have stabilised and the revenue run-rate over 2013 will largely mirror the second half of fiscal 2012," Mr. McLemore said.

Boart expects capital expenditure this year to total US$50 million, with more costs likely stripped out of the business in the January-to-June period.

Write to Rhiannon Hoyle at [e-mail]

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