Boart Still Under Pressure

Shares in Boart Longyear (BLY) fell more than 15% yesterday after the drilling company slumped to a full year net loss of $US620 million ($A691 million).

That loss was significantly higher than the $68 million of red ink incurred in 2012, and once again raised questions about the company’s longevity.

Big write downs last year again drove the bottom line lower.

Worrying investors yesterday was news of another ‘review’ of the company by consultants, which could mean further write downs and losses this year.

Not surprisingly, the company did not declare a a final or a full year dividend.

The shares ended the day at 36c, down 15.3%, after touching a low of 35c.

That wasn’t the lowest they have been – Boart shares dropped to around 26c in December.

They then spent the next two months recovering slowly to reach just under 50c earlier this month on hopes the rotten market conditions and continuing losses had been put behind it.

But in the past couple of weeks they have resumed their downward trend and last week dipped more than 3.2%.

BLY 1Y – Boart Longyear’s financial position still under pressure

Yesterday the company not only revealed another big annual loss, but spoke bearishly about the outlook.

Boart Longyear said 2013 had been a challenging year, with falling commodities prices and increased political and economic risk for mining activity.

In fact revenue fell 39% to $US1.22 billion from $US2.01 billion. The second half performance was very weak with revenue and underlying earnings both weakening.

And the company forecast little improvement in 2014, telling the ASX that key commodity prices will remain weak.

The company has not issued guidance for 2014 revenue, but said it expects primary factors driving its revenue, such as rig utilisation rates and product sales volumes to remain consistent with fourth quarter levels.

"We will continue to focus on our current priorities of debt reduction, safety and compliance and serving our customers’ needs," chief executive Richard O’Brien said.

"We also will continue to pursue improvements to our capital structure as necessary. Profitability would be influenced by price, productivity and management’s ability to further control costs," the company said.

The lack of any confidence about the coming year, and the forecast of no real improvement from the weak 4th quarter of 2013, helped sour investor confidence after the report was released.

Boart Longyear has appointed Goldman Sachs to conduct a strategic review to ensure "all options are considered" to position the business to capitalise on future opportunities.

Boart Longyear was hit by $US461 million of restructuring costs and impairments after cutting 3481 jobs during 2013.

Boart has debt of around $US600 million.

The company revealed it had again negotiated new financial covenants to cover its debt including minimum cumulative earnings over the last 12 months of $US45 million until March 31, 2015.

That’s a form of insurance if there are more losses this year.

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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