Boart sees massive earnings drop as Swick lifts profit

Despite lowered exploration from miners on a cost cutting frenzy, two drilling companies, Boart Longyear and Swick Mining Services have seen dramatically different results.

Boart Longyear has suffered another tough year, and seen a 35 per cent fall in revenue year on year, according to its latest first half results.

It recorded revenues of just US$719 million in the first half of 2013, down from US$1.099 billion the same last year.

The drilling contractor and manufacturer reported a 95 per cent fall in EBIT/Operating profit, while at the same time recording a 51 per cent increase in its net debt levels.

Boart explained away the loss, stating that the "first half 2013 results reflect substantially different market and operating conditions compared to the same period in 2012".

"Commodity price weakness and slowing growth in China affected the mining industry negatively throughout the first half of 2013. The company's key customers responded to the market's volatility by significantly reducing their capital budgets and, as a result, their demand for the company's drilling services and products."

Heads rolling

Boart stated that it will shift its focus to reducing cost, working capital management, and its capital structure.

Part of this has been a massive headcount reduction over the last 12 months, cutting its workforce from 11 440 down to 7147 workers.

Around 2800 of these personnel were cut in the last six months alone, with the company slashing about a quarter of all of its general and administrative positions across the business.

It also carried out a "rationalization of manufacturing, inventory and administrative facilities" which saw it axe jobs at its Forest Field branch and 're-purpose' its Perth facility.

The company's president, Richard O'Brien, stated that "our operating performance and the restructuring and impairment charges we took during the first half reflect the very challenging conditions in our markets since the beginning of 2013".

"The magnitude and velocity of the market's contraction during the year has surprised many people in the industry; while we continue to be challenged in implementing cost reductions quickly enough to keep pace with the market's decline, we are taking aggressive steps to control costs," O'Brien said.

"Our latest cost reduction initiatives should lead to approximately US$90 million of reductions, on a run-rate basis, by the end of 2014 in addition to the US$70 million of reductions announced in late-2012 and already being realised in 2013".

Not all doom and gloom

However one Australian mining contractor is defying the current market trend.

Swick Mining Services recorded a 17 per cent growth year on year, seeing a FY13 NPAT of $11.3 million.

It's net cash from operating activities also dramatically increased, rising 44 per cent, while at the same time its debt levels fell 78 per cent.

It achieved a full year revenue of $146.5 million and EBITDA of $30.8 million, representing an annual growth of 7 and 8 per cent respectively.

Swick saw a total of 54 rigs utilised out of a fleet of 78 as of June 30, compared 58 rigs from a fleet of 72 this time last year.

Kent Swick, the company's managing director, stated its company announcement that "the full year results is very satisfying and underlines the relative strength of the Swick business model within the global mineral drilling marketplace".

While "Swick is very aware of the pressures that exist in the market, with low commodity prices affecting margins of the operators, Swick has been working with its clients……to be honest, these times allow the industry players on both sides of the supply and demand chain to work closely to be more efficient and productive and hopefully this can remain the same when prices and margins improve".

At the end of this quarter its employees totaled 615.

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