2013 full year results:
In spite of 2013 being an extremely challenging year for the global mining industry and the Company’s core markets, the Company generated
|(US$M)||2012||2013||% Change||(US$M)||2012||2013||% Change|
|Gross Margin||512||202||-61%||Gross Margin||512||202||-61%|
|Gross Margin as a % of Revenue||25%||17%|
Gross Margin as a % of Revenue
|EBIT / ||127||(468)||NM||EBIT / ||195||(24)||NM|
|EBIT / ||6%||-38%||EBIT / ||10%||-2%|
|EBITDA (loss)||254||(337)||NM||EBITDA (loss)||322||107||-67%|
|EBITDA as a % of Revenue||13%||-28%||EBITDA as a % of Revenue||16%||9%|
|NPAT (loss)||68||(620)||NM||NPAT (loss)||116||(94)||NM|
|NPAT as a % of Revenue||3%||-51%||NPAT as a % of Revenue||6%||-8%|
|Cash from Operations2||156||76||-51%|
Additional analysis of the Company’s 2013 financial performance and results is available in the Operating and Financial Review of the Company’s preliminary annual financial report for 2013.
The Company’s Drilling Services division recorded revenue of
|EBITDA as a % of Revenue||19%||16%||15%||15%|
The Company’s operating drill rig utilisation averaged approximately 40% during 2013, with a more significant decline experienced during the second half of the year. Going forward, the Company will report its utilisation metric using only operating rigs in order to better reflect current operating conditions. The Company has, prior to this release, calculated drill rig utilisation as the sum of the weekly average of operating rigs plus the number of rigs assigned (but not yet drilling) to a contract divided by total rigs in the fleet.
While the division won key contracts in
Revenue for Boart Longyear’s Products division was
|EBITDA as a % of Revenue||22%||12%||-5%||5%|
Revenue and EBITDA for the Products division declined through the year until stabilising in the second half of 2013 (apart from the typical seasonal decline the business experiences around the holiday period). Revenue in the first half of 2013 was
Investments continued in new product development, which resulted in six new products being launched in 2013, and ongoing new product development activity has focused on production tooling and equipment and incremental enhancements to existing products to drive safety and productivity.
The Products division’s results were impacted by low rig utilisation rates among its customers, who continued to de-stock throughout the year and appear likely in 2014 to hold only minimal levels of inventory necessary to support their ongoing operations.
Credit Agreement Amendment
Based on the Company’s view that market conditions may not significantly recover over the next twelve months, the Company negotiated an amendment to its Credit Agreement that is intended to provide continued access to the revolving credit facility and additional head room under the Credit Agreement’s financial covenants. The amendment, which became effective on
New financial covenants have been added, which require:
The specified maximum Total Debt5 levels may vary upon the occurrence of certain events. In addition, the amendment adjusts fees and pricing, introduces new financial reporting requirements, establishes a monthly borrowing base of specified assets to allowed borrowings, limits annual capital expenditures and requires the Company, by
Material Uncertainty and Strategic Review of Options
As disclosed in the Company’s financial report, the Company’s full-year 2013 financial statements have been prepared on the basis of a going concern, subject to certain risks outlined in Note 2 of the financial report that give rise to a material uncertainty about the Company’s ability to meet its financial obligations as and when they come due. The Company contemplates the continuity of normal business activities and the realisation of assets and settlement of liabilities in the ordinary course of business and in their stated amounts. At
The Company believes it will successfully manage its business and associated liquidity risks despite the weak and uncertain market environment via further operational enhancements, opportunities to reduce costs associated with potentially declining business conditions and other strategies for managing liquidity and accessing capital. The Company’s Board of Directors also has appointed Goldman Sachs as its advisor and initiated a strategic review to maximise value for Boart
Cost Reduction Update
Since late 2012, the Company’s management team has taken aggressive actions to reduce its overall fixed cost profile through the removal of certain SG&A and overhead expenses. Nearly
Management continues to pursue other efficiencies through longer-term structural improvements, and the benefit of those efficiencies is expected to be realised in future periods. The Company expects 2014 SG&A to be between
In light of current circumstances, the Board considers it appropriate not to declare a dividend for the period ended
Key Performance Indicators
The Company reports the following key performance indicators, including the reduction in net debt achieved despite challenging conditions.
|Avg. Rig Count||~1,150||~1,140||~1,040||~1,030|
|Avg. Operating Rig Utilisation (new)||~40%||~45%||~40%||~30%|
|Avg. Operating + Assigned Rig Utilisation||~60%||~50%||~45%||~40%|
|Avg. Product Backlog|
The Company is not providing a market outlook for 2014 revenue or EBITDA given current market uncertainty. It expects, however, that the primary factors driving its revenue, such as rig utilisation rates and product sales volumes, will remain broadly consistent with levels experienced in the fourth quarter of 2013. Profitability will be influenced by those and other factors, such as price, productivity and management’s ability to further control costs. The Company believes current market expectations for 2014 revenue and EBITDA, including even at the low end of 2014 analyst estimates compiled by
Richard O’Brien, Boart Longyear’s President and Chief Executive Officer, commented on 2013 results, “2013 was difficult for the Company and its stakeholders. We have taken decisive and aggressive action throughout the year to confront and manage the challenges created by our markets and leverage. We will continue to focus on our current priorities of debt reduction, safety and compliance and serving our customers’ needs. We also will continue to pursue improvements to our capital structure as necessary to maximise value for all stakeholders.
“To that end, we have initiated a strategic review to ensure all options are considered carefully and completely, not only to meet today’s needs but to position the business to capitalise on future opportunities. Our markets will improve, and, when they do, we are much better positioned to deliver improved profit margins and cash generation through our cost efficiency measures, revised capital deployment strategies, increased speed to market, more customer-driven design and our combined platforms for supply chain, inventory management and maintenance services.
“While we cannot predict when our markets will recover, we have the experience of 120-plus years to know that mineral exploration spending will increase, as mining company reserves must be replenished to satisfy ongoing, worldwide commodity demand. Boart Longyear will continue to stand ready to serve existing and expanding markets for our Global Products and Drilling Services customers around the globe.”
This announcement contains certain “forward-looking statements.”The words “anticipate, “believe”, “expect”, “project”, “forecast”, “estimate”, “likely”, “intend”, “should”, “could”, “may”, “target”, “plan” and other similar expressions are intended to identify forward-looking statements.Indications of, and guidance on, future earnings and financial position and performance are also forward-looking statements.Due care and attention has been used in the preparation of forecast information.Such forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors, many of which are beyond the Company’s control and may cause actual results to differ materially from those expressed or implied in such statements.There can be no assurance that actual outcomes will not differ materially from these statements.
About Boart Longyear
With over 120 years of expertise, Boart Longyear is the world’s leading provider of drilling services, drilling equipment, and performance tooling for mining and drilling companies globally. It also has a substantial presence in aftermarket parts and service, energy, mine de-watering, oil sands exploration, and production drilling.
The Global Drilling Services division operates in over 40 countries for a diverse mining customer base spanning a wide range of commodities, including copper, gold, nickel, zinc, uranium, and other metals and minerals. The Global Products division designs, manufactures and sells drilling equipment, performance tooling, and aftermarket parts and services to customers in over 100 countries.
Boart Longyear is headquartered in
1Adjusted EBITDA, Adjusted EBIT, and Adjusted NPAT are non-IFRS measures and are used internally by management to assess the performance of the business and, for 2013, have been derived from the Company’s financial statements by adding back
2 Before interest and tax payments
3 Excludes contingent liabilities relevant to determining bank covenant compliance.See footnote #31 in Financial Report.
4 Does not include restructuring and impairment charges
5 “Total Debt” means, as of any date, the Total Revolving Outstandings and any other Finance Debt of the Group outstanding (whether actually or contingently) on that date, but excluding (to the extent otherwise included): (i) contingent exposures under hedge or derivative transactions other than currency hedge or derivative transactions that hedge Finance Debt; (ii) Finance Debt owed by a Group member to another Group member; (iii) contingent liability under any letters of credit (other than those issued under this Agreement) which support performance obligations of a Group member,performance bonds or performance guaranties (or bank guaranties or letters of credit in lieu thereof) occurring within the ordinary course of business but not obligations in respect of Finance Debt; and (iv) to avoid double counting, contingent liability under any other letters of credit issuedto secure external Finance Debt of a Group member to a financier to the extent such Finance Debt is already included in the calculation of the definition.
Director, Corporate Communications