Swick drops earnings and revenue forecasts

DRILLING contractor Swick Mining has cut its forecast earnings margin for 2014 by 4%, also reducing its full-year revenue expectations by about 8%.
Swick drops earnings and revenue forecasts Swick drops earnings and revenue forecasts Swick drops earnings and revenue forecasts Swick drops earnings and revenue forecasts Swick drops earnings and revenue forecasts


Andrew Duffy

Under the new guidance, Swick expects the FY2014 earnings before interest, tax, depreciation and amortisation margin to be 14-16%, down from 18-20%.

Full-year revenue is expected to be between $115-125 million, down from $125-135 million.

Performance in the first half of 2014 is expected to slow the most, with first-half revenue expected to land at $54-57 million, down 26% year on year.

The first-half 2014 EBITDA margin is forecast between 12-14%, down 38% year-on-year.

“The global mineral drilling environment is very challenging at the moment,” Swick managing director Kent Swick said.

“Swick was fortunate in the fact that the impact of the current global commodity downturn and client capital expenditure restrictions didn’t materially affect the business until this half.”

Swick said productivity had been a focus for the company, and expansions overseas would be necessary to keep the company growing.

“The longer term sustainable growth in Swick’s niche service provision requires a significant international footprint,” he said.

“Whilst there may be questions about the international pursuits of the business, Swick must learn to operate in new regions and challenging ground types and become as proficient in these locations as we are in the Australian market.”

Swick said companies had been conservative with drilling expenditure in the first-half of 2014, but the slowdown looked to be easing as new budgets were approved.

Despite the challenging conditions the company said its underground diamond drilling market share continued to grow, and new contracts had provided it with an order book approaching $300 million.

The company also said it remained committed to its objective of doubling metres per man-hour from FY2012 to FY2017.

On the international side of the business, the company said it was continuing to gain an understanding of the different equipment and techniques needed, and a European contract had been a particular focus.

Swick said the international business had suffered a loss in the first half, but is expected to return to profitability by the fourth quarter of FY2014.