This news comes as the company announced that its earnings before interest, tax, depreciation and amortisation (EBITDA) guidance would be revised downwards.
Boart also announced it would consolidate its sonic drilling services with its main exploration drilling service business. It would review options for its sonic services on environmental and infrastructure markets.
Investors seemed to respond positively to the news, with the company’s stock rising about 7% this morning to $1.38.
The EBITDA downgrade is due largely to expected margins not being achieved, which was largely due to the lag impact of implemented workforce reductions.
Chairman and interim chief executive officer David McLemore said management had moved to implement annualised overhead cost savings across the business of about $US70 million ($A67.5 million) – equivalent to more than 20% of the company’s global overhead – in the month since he took his interim CEO role.
Closing the Perth manufacturing arm and consolidating the sonic drilling operations were additional to that. Those and other cost-saving actions are expected to cost Boart Longyear about $US15-20 million.
“While still subject to full review and audit, our preliminary work on potential impairments indicates a post-tax, non-cash charge of approximately $50 million, which will be taken as part of the year-end close,” McLemore said.
He was confident, however, that the squeeze was easing, with contract negotiations underway indicating market demand had stabilised and revenue in 2013 should approximate second-half 2012 levels.
As cost take-outs in the second half of 2012 flow through, Boart expects its margins will recover and push EBITDA above second half 2012 levels.
“Boart will continue to invest in key areas of the business but will be cutting back significantly on our capital expenditures through the first half of 2013,” McLemore said.
“The actions we have taken put the company in a strong position to withstand difficult market conditions while retaining the capacity to respond quickly to any upturn in demand for our products and services.”