Seven Group signals more restructuring within mining services sector

Industry earnings downgrades and share price slumps make up recent downtrend

a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Seven Group's (ASX: SVW) WesTrac heavy equipment business will be cutting 630 jobs to further adjust to the harsh realities of the mining sector. WesTrac operates Caterpillar equipment and vehicle dealerships in Western Australia, New South Wales, the Australian Capital Territory and in Northeastern China, and makes up 96% of Seven Group's revenue.

Mining companies are scaling back new developments and expansions, so fewer vehicle sales have resulted in the company announcing this second round of workforce cutbacks. Previously, 375 positions were made redundant in its NSW/ACT operations. All up, these staff reductions will cost the company about $21 million in restructuring charges.

Lower sales are expected to flow on to affect earnings guidance, which the company now says that full-year underlying earnings before interest and tax (EBIT) will be now at the lower end of the previous guidance of 30%-40% below the previous year.

The company owns 35% of Seven West Media (ASX: SWM), which operates the Seven Network television business as well as its print and online media. This ownership stake contributed $105. 8 million of EBIT in 2013, or 16.7% of Seven Group's total EBIT. It also owns 45% of Coates Hire, the equipment rental services provider.

Other mining service-related companies will be announcing earnings guidance soon, and the first of them already are not painting a bright picture.

Boart Longyear (ASX: BLY) has dropped in share price from about $2.20 in February to $0.40 now. Its 2013 NPAT was 58% lower than in 2012, down to $65.6 million. It is looking to have more drilling work in 2014, but even keeping equipment and staff at peak performance will cost money while it waits for miners to get back to more exploration.

Emeco Holdings (ASX: EHL), operator of equipment and vehicle fleet rentals, is at $0.25 a share after a slide down to $0.17 in September following the 2013 annual results showed NPAT being decimated in the literal sense by going from $69.7 million to $6 million. Revenue from its Canadian division held up, but it saw a loss in Indonesia.

Ausdrill (ASX: ASL) was in a trading halt for two days last week as it prepared to announce its operating performance. It now is expecting 2014 full-year profits to be about half or even less than 2013's NPAT after abnormals of $90 million. Its $35 million-$45 million earnings guidance sent the share price gapping down from about $1.40 before the trading halt to $1 following reinstatement of trade.

Motley Fool contributor Darryl Daté-Shappard does not own shares in any company mentioned. 

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »