Mining services group Boart Longyear will review its dividend payout after cutting its 2008 guidance.
In a global update call, the company yesterday said it now expects revenue to be 18% higher than in the prior year and earnings before interest, tax, depreciation and amortisation (ebitda) margin would be 22% higher before restructuring charges.
While the ebitda margin guidance was unchanged from earlier guidance, the revenue growth figure is a cut from a 22% rise in a previous update.
"In addition, given the uncertain market conditions and the Company’s debt reduction target, the Board of Directors intends to review the Company’s existing dividend policy,” the company said in yesterday’s statement and call.
The company paid a small dividend of 1.7c a share in its first period as a listed company.
But the company seems to girding its loins for a tougher 2009.
"Customers are not committing," Boart President, Craig Kipp told a conference call from Salt Lake City in the United States.
"We’re planning for roughly minus 20 per cent revenue to minus 30 per cent revenue (in 2009).
"We don’t think it’s going to be as severe as a 50 per cent revenue drop. We’ve heard that number passed around, and it’s hard to believe that the revenue is going to be flat with this year."
Citing a weaker Australian and Canadian dollar and weaker sales in its products division, Boart forecast revenue in the 12 months to December 31 this year to be 18% higher than in 2007, down from earlier guidance of 22% revenue growth.
Boart’s reported revenue in 2007 was $US1.57 billion ($A2.43 billion), up 41% on the prior year.
Boart said the revised guidance was "in light of the recent decline in the value of the Australian and Canadian dollars as well as lower revenues from the Company’s Products division".
Mr Kipp said in the statement that the performance of the company’s Drilling Services business "continues to be very solid, even with approximately 15 per cent of our rigs now idle.
"However, our Products business has recently experienced a decline in orders for manufactured products, particularly in our capital equipment product line.
"This decline in orders is starting to flow through into lower revenues," Mr Kipp said.
Given "the ongoing global macroeconomic conditions", he said, Boart "expects that 2009 will present a challenging operating environment.
"As a result, the Company is taking action to implement announced cost reduction activities and other plans to reduce costs and working capital."
In October Boart Longyear revised its revenue growth for 2008 to 22% on the previous corresponding period, down from earlier guidance of 25%.
Mr Kipp said Boart already had cut 500 positions from its workforce in its Drilling Services and Products divisions.
"Additional actions are expected to be announced by the end of the year, including further rationalisation of the Company’s manufacturing capacity as well as a significant re-alignment of business support and administrative functions."
Boart said restructuring charges associated with the changes were expected to be $US10-20 million in 2008.
"While the company’s financial position remains sound, our focus in 2009 will continue to be managing liquidity and re-positioning our balance sheet through debt reduction," Mr Kipp said.
"Total liquidity, including availability under our revolving credit facility and cash balances, is expected to be approximately $85 million at year end, which is more than adequate for the Company’s anticipated needs in the future."
He said Boart expected to reduce outstanding net debt by up to $150 million in 2009 through lower capital spending, reduced acquisition activity and substantial reduction in net working capital.
Boart shares have lost nearly 90% of their value this year on the ASX, thanks to the sharp slowdown in the global resources industry and prices.
The shares finished at 22c, down 1.5c. It seems no one was happy.