Seven Group squeezes in last-minute downgrade

Seven Group Holdings (ASX: SVW), controlled by self-made billionaire Kerry Stokes, has released a revised profit guidance and details of a plan to restructure its main operating division WesTrac.

WesTrac houses the company’s Caterpillar machinery franchise. After recent downgrades from Emeco Holdings (ASX: EHL), which leases heavy earth moving equipment, it won’t take many by surprise that WesTrac’s business is suffering from the slowdown occurring across the resource sector.

In response, WesTrac is restructuring to reduce costs, which will lead to 350 redundancies across its NSW and ACT branches. The restructuring will directly lead to a $10 million  expense, however of greater concern to investors, management has been forced  to guide the market towards “the low end of previous guidance”.

Foolish takeaway

Thankfully shareholders in Seven Group are somewhat shielded from the full brunt of the mining slowdown thanks to the significant shareholding the company has in Seven West Media (ASX: SWM) and other investments. While the television networks are not exactly enjoying boom times at the moment, the share price performance of Seven Group compared with many other mining service firms shows the benefits diversification can bring.

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Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.

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