Western Australian contractor Clough is on the look out for takeover opportunities, claiming the mining slowdown has left the services industry brimming with consolidation prospects.
Last month resources exports overtook construction imports, signalling a peak in mining investment, and resulting mining contractors being hit by profit downgrades and share price slumps, ABC reports.
The past year has also seen a mass of projects shelved, jobs slashed and mining contracts cut back.
Clough chief executive Kevin Gallagher said the state of the sector has got his company on the lookout for takeover opportunities.
"The sector lends itself to consolidation over the next couple of years," he said.
"We are looking at some inorganic opportunities, some acquisition opportunities, so yes, we are looking to take advantage of the slowdown in that sense."
Gallagher said the mining services sector has not done enough to prepare for a mining slump.
"There was possibly a feeling that it was going to keep going, the boom was going to keep going for another couple of years," he said.
"We've seen the slowdown now and those downgrades, I would imagine, are a reflection of re-forecasts. So maybe there was over-optimism."
A mining construction and engineering company, Clough is focussed on Australia’s growing LNG industry and is currently working on Chevron’s Gorgon project in Western Australia.
The company has also bucked the trend of contractors downgrading profit expectations, instead upgrading profit and revenue forecasts, predicting before tax profit for this financial year will come in at around $90 million with revenue sitting at $1.5 billion.
Over the last 18 months the company has moved to cut overheads by $10 to $12 million and merging corporate offices.
"We saw this coming some 18 months or so ago and we starting preparing then for what we expected would be a downturn across the sector," he said.
"We implemented a number of austerity measures across our business then."
Despite Clough shares falling by almost 13 per cent over the last three months, the stocks have risen by half over the last year to $1.13, ABC reports.
Mining contractors including Macmahon Holdings, NRW Holdings and drilling company Boart Longyear are facing tough times.
Earlier this month mining powerhouse GlencoreXstrata terminated Macmahon’s contract to expand the CSA Cobar mine.
Macmahon has already forecast a $20 million loss for the year to June 30, after a $37.6 million loss in the six months to December 31.
The possibility of heightened takeover activity in the mining services sector has got one analyst, who wished to remain anonymous, sceptical.
He said there remains too much uncertainty for large scale mergers and acquisitions to be executed; instead predicting companies are more likely to look to investors for funding.
But with Cough focussing on LNG, mounting wage costs and stifled productivity rates are going to be major challenges going forward.
According to the International Energy Agency chief economist Fatih Birol the rising cost of resource operations in Australia isn’t helping the emerging gas sector.
Gallagher said it will take some time for costs to come down as contracts wind up.
"I think for the major projects it's too soon to say that costs have come down," he said.
"I would expect we see the costs come back over the next two to three years."