More than $150 million has been wiped from the value of mining engineer Transfield Services as cost cutting in the mining sector sent its shares to a record low.
The company has slashed its profit forecasts and fast-tracked additional cost saving measures, including job cuts, in response to weaker demand for its services.
But analysts say Transfield’s decision to slash 113 jobs comes too late as mining giants BHP Billiton and Rio Tinto reduce their capital works spending.
Transfield shares fell to 97 cents on Tuesday, a 23.9 per cent fall, and a slight recovery from its all-time low of 96.5 cents earlier in the day, making them one of the worst-performing movers on Tuesday.
“Ongoing uncertainty in commodity markets is resulting in the delay to, and deferment of, a range of resources and infrastructure projects,” Transfield said in a statement.
“More immediately, scope reductions and cancellations of works across the operations and maintenance sector are impacting earnings in the short term.”
Morningstar senior equities analyst Ross MacMillan said investors were worried about mining construction firms missing out, as the major miners scaled back their capital works.
“You’re seeing the large mining companies, BHP and Rio, but even the medium-sized mining companies, their major focus at the moment is cost containment, so that’s impacting the contractors,” he told AAP.
He added the commodities boom peaked at the end of last year, and had dented the earnings of rival engineering construction firms, UGL and WorleyParsons.
“The mining boom that we’ve seen over the past decade really appears to have peaked and we’re going to see a slowdown,” he said.
“It’s difficult to imagine the Chinese economy growing at the double digit growth that we’ve previously seen.”
Transfield has reduced its net profit forecast, before impairments, to between $62 million and $65 million, in the year to June 30, down from its previous forecast range of $85-$90 million.
The company has also fast-tracked more cost cuts, which includes 113 retrenchments.
Transfield had already axed 270 jobs, in the four months to December 31 last year, as part of a $29 million cost cutting program.
But Mr MacMillan said Transfield should have cut more jobs last year.
During 2012, mining operations comprised 10 per cent of its revenue, while infrastructure and property projects made up another 60 per cent of earnings, with the rest in hydrocarbons.
