Mining services group Boart Longyear has warned analysts they may be overestimating its chances of a post-election lift.
Photo: Greg McKenzie
Profit reporting season is winding down, but in a way yesterday provided two of the most worrying results.
The first came for Boart Longyear, a mining services company in the fight of its life against the end of the mining boom.
On Monday, the company posted a $US329 million net loss for the six months to the end of June, down from a net profit of $US98 million last year. The global drop in mining investment is ravaging businesses like Boart, which cut a staggering 3400 jobs last year.
But what no one expected was that the company would reveal conditions in the mining sector haven’t bottomed. The company warned that analyst expectations of its full-year earnings were too high and the stock watchers had overestimated the state of the mining sector.
“Analyst expectations may not adequately reflect the risk of price erosion in the second half and may assume a larger benefit from the cost saving initiatives,” executives said in their commentary.
If you are in the mining sector, the Boart warning is obviously a huge worry. But it’s also a concern for the wider economy.
Still crucial to growth
Kevin Rudd rightly says the mining boom is over, but what he means is the peak is behind us; the sector remains crucial to economic growth. If mining is still on the way down, it may be hard for the economy to pick up.
A similarly worrying warning came from retail group Speciality Fashion Group, home to brands including Millers, Katies, Crossroads, Autograph and City Chic. The company posted a profit of $13 million, compared with a loss of $3 million, and recorded a solid increase in online sales.
Managing director Gary Perlstein has a warning for those expecting a post-election spending boost. “Traditionally during an election, it really hurts retail . . . there could be some improvement (after the election) but as I’ve got closer to the election date, I’m less optimistic.”
That’s a real worry for retail, but also a worry for entrepreneurs hoping for a pick-up in consumer and business confidence after the world’s longest poll is over.