Cost cuts critical for mining service providers as projects dwindle
PERTH (miningweekly.com) – Cost reductions and efficiency programmes have become increasingly critical for mining service providers as the number of major resource projects continued to decline, advisory firm Deloitte reported on Wednesday.
In its latest Mining Services Index, Deloitte noted that eight out of the top ten participants experienced a decline in the three months to June, with the index itself declining by 4.71 points, or A$1.86-billion of market capitalisation.
Deloitte financial advisory services partner Nicholas Harwood said the changes in the market capitalisation values of many operators from the first quarter to the second quarter highlight continuing volatility in the industry.
“Many of the market capitalisation swings are double digit in percentage terms –as much as 50% to 75%. Of the top ten participants – those with market cap over A$1-billion – eight experienced decreases.”
Only WorleyParsons (up 12%) and ALS (up 18%) experienced increases.
Harwood noted that common themes across the sector included participants reporting the continued decline in major projects and delays in commencing committed projects.
“Many are implementing cost reduction and efficiency programmes and are advising progress is in line with expectations. It is clear that service providers and contractors need to continue to adapt to current and emerging market circumstances, as it appears these will predominate for some time.”
The index pointed to Deloitte Access Economics data, which indicated that despite a spate of recent project approvals, the short-to medium-term outlook for infrastructure spending remained one of declining investment levels, amid softer commodity prices.
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