“As expected, the market environment in the first quarter of 2009 presented many challenges,” chief executive officer Craig Kipp said.“With the decisive cost-reduction actions we took late last year and in the first quarter of this year, we have been able to partially offset the impact of lower revenues.“However, the full impact of our cost-reduction initiatives won’t be realised until the second quarter.”The company, which specialises in contract drilling for the mining sector, said while sales and earnings for drilling services and products this year had already declined, the fall in products would be “more severe due to very depressed levels of capital equipment sales activity”.The focus for 2009 will be on cost-reduction and cash-generation initiatives, including job cuts and staff restructuring.Since last year, the company has already cut around 30% of its workforce.“Reductions have occurred in all areas of the business, including direct drilling and support employees, manufacturing labour, and global and regional administrative functions,” Kipp said.“As a result, first quarter selling, general and administrative expenses were approximately 34% lower compared to the third quarter of 2008.”The company anticipates the continued restructuring will incur charges of about $US10 million in the six months ending June 30. Kipp said he remained cautiously optimistic the remaining part of 2009 would see a gradual recovery in business activity and profitability, but did not expect meaningful improvement in revenues before the second half.“The timing and magnitude of the ongoing recovery in our business will depend on the rate of recovery in global economic conditions,” he said.
