No signs of improvement: Boart

Boart’s chairman, Graham Bradley, told shareholders that while 2008 had been a bumper year for the company, with revenues and earnings both significantly higher, conditions had deteriorated “rapidly and dramatically” in the fourth quarter. While that is not news to most in the mining sector, those looking for a ray of hope from Boart would be disappointed, with Bradley saying challenging business conditions have continued – to the point where Boart, like many other companies, has found itself heavily indebted and with massively falling revenues. “We have not yet experienced a significant recovery in our products division, order book or in drill rig utilisation,” Bradley said. “Our rig utilisation rates dropped and our sales of manufactured consumables and capital equipment have declined sharply.”Along with falling revenues, the company has $US700 million in debt, with some $585 million of this debt maturing in April 2010.Bradley told shareholders yesterday the debt was “one of the most significant issues weighing on the company’s share price”.Not only does it have to repay the debt next year, in the meantime Boart has to meet financial covenants, including limits on the level of its net debt to its earnings before interest, tax, depreciation and amortisation, and a minimum level of EBITDA to interest expense.These are due to be tested at the end of this year and Bradley admitted the company might not meet its net debt to EBITDA ratio limit unless sales improved substantially. “We are committed to resolving our refinancing requirement by the end of the year, ahead of both the final facility maturity date and the year end covenant testing date. Ultimately, success in this will depend on the rate of progress with our banking syndicate,” Bradley added.This refinancing could involve a capital raising, with Boart’s chief executive officer, Craig Kipp, saying all financing options were under consideration. Additionally, in order to cut costs, Boart has slashed its workforce by around 35%, and its board and senior management have agreed to a 10% reduction in salaries. Kipp has also agreed to a 15% salary cut.The company has suspended any acquisition activity and cut its capital expenditure budget from $US154 million in 2008 to $40 million, which will fund only essential maintenance items.Bradley said the company was not forecasting any improvement in business conditions until at least the second half of 2009. In late April the company said it expected revenues to be 35-45% lower than in 2008.Boart – listed in Australia but based in Salt Lake City in Utah – was last traded at A14.5c, up slightly from yesterday’s close at $14c.

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