Mining service company Ausdrill has downgraded its profit forecast, causing shares to plummet.
The Perth-based contractor said it expects earnings before interest, tax, depreciation and amortisation (EBITDA) of between $150 million and $160 million.
Last year the company reported EBITDA of $170 million.
Ausdrill said the weaker than expected outlook reflects a continuation of challenging market conditions which are expected to remain sluggish during the next 12 months.
The collapse of Western Desert Resources has left Ausdrill with $8 million in bad debt and $16 million in lost revenue.
The company has also been advised that its contract for drill and blast services at the Edna May Gold Mine will finish up earlier than expected in December this year.
In a review of its other business areas, Ausdrill said it expects revenue to be reduced by $35 million as result of spending cuts by iron ore miners.
The company said the underperformance will require it to test business units for impairments, which will be carried out as soon as possible.
Ausdrill said it expects to remain in full compliance with its debt covenants.
Shares in the company fell 12 per cent yesterday to 76.5 cents.
Despite the downgrade, Ausdrill’s managing director Ron Sayers said the company was in a stable position financially.
“The company remains in a stable financial position. We certainly do not consider that our forecast result is acceptable, even in these challenging times, and every member of our team is working hard to achieve the returns necessary for a company of our size,” Sayers said.
“In addition, the deleveraging plans we are pursuing will ensure that the group will be well placed to benefit from any upturn and opportunities that arise in the mining industry.”