Bradken will cut more than 500 jobs as a downturn in mining, high costs and globalisation is blamed by its CEO for a major restructure.
The head of Bradken has warned that he cannot see a medium-term turnaround in the company’s fortunes as he announced the cutting of more than 500 jobs.
The end of Australia’s mining investment boom along with high costs and globalisation were blamed by chief executive Brian Hodges for the decision to slash 10 per cent of Bradken’s workforce to 4,700.
That is 25 per cent below its 2012 peak.
More than half the cuts will be made in Australia and during the next 14 months, targeting workers in Bradken’s manufacturing operations which supply large heavy metal equipment for machines used by miners.
Last week it announced the closure of its Henderson foundry in Perth, relocating that work to Brisbane and its Xuzhou foundry in China.
Mr Hodges said he thought the mining downturn had hit bottom and was recovering but he doubted Bradken’s smaller plants would ever be profitable because of high wage and energy costs and that was why he was acting.
“Australia is knowledge rich in terms of products and manufacturing but the facilities within Australia I am involved with were built for a regional market before globalisation,” he told AAP.
“The industry cycles but it doesn’t always cycle back to the same point … they really won’t be competitive with the cost economies of global sized plants when prices will be lower and global competition stronger.”
He said Bradken had held off its “rationalisation” for as long as it could.
“I was hoping the cycle would come back faster but that doesn’t look to be the case in the short to medium term,” he said.
Bradken is the latest in a string of mining services companies at the mercy of the miners to axe thousands of workers in the last two years.
The most extreme recent example was the financial collapse in February of Perth mining contractor Forge Group, with the loss of 1,400 jobs.
Bradken’s specific problems include falls in demand for durable capital products – as opposed to consumables – which indicates a lack of new mining projects.
Invast chief market analyst Peter Esho said the company was also exposed to a downturn in production volumes by miners – coal especially – because of lower prices meaning less of their equipment was needed.
“There is a timing gap until prices stabilise and I think they will for coal but it might take a year or two,” he said.
Bradken had to service high debt and could not wait forever for an uptick in mining activity, he said.
Bradken’s shares plunged by 30 cents, or 7.7 per cent, to $3.62, its lowest level since May 2009 and sparked falls in most other mining services companies with it.
The restructure would cost $51.4 million this year and hit this year’s after tax result by $17 million.
Bradken says it will reduce operating costs by $27 million a year.
Its first half profit, reported in February, tumbled 18 per cent to $38.1 million.