Earnings downgrade and job cuts for Seven Group Holdings

Seven Group Holdings said it will be forced to make triple digit job cuts as the fall in commodity prices puts pressure on the business.

At the company’s general meeting yesterday, chief financial officer Richard Richards said the industrial side of the business was suffering.

He said the WesTrac division, which sells Caterpillar equipment expects underlying profit earnings before interest and tax to fall by 10 to 15 per cent on the $374 million posted for 2014.

"Our industrial services businesses in particular have been further impacted by further significant reductions in commodity prices, including iron ore, gold and thermal coal," Richards said.

“This has driven further rounds of cost cutting within the major miners and a reluctance to invest in new capital equipment. Such dynamic changes in commodity prices and our customers’ actions make it more challenging to forecast demand for parts and services, with many customers deferring maintenance and extending shut downs over Christmas.

“We do not see any near-term improvement to this outlook.”

Chief executive Don Voelte said that up to 10 per cent of the equipment WesTrac supplies was sitting idle at mines.

‘‘This has facilitated component cannaibalising to reduce cash burn with a consequent reduction in our service and parts market and very limited demand for new equipment,’’ Voelte said.

The company expects to cut more than 100 jobs is a bid to cut costs and modify work processes.

Shares in the company have fallen by 9.2 per cent to $5.90 since the announcement.

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