BRADKEN’S Brisbane foundry will get a much-needed boost as part of a massive restructure resulting in the troubled heavy engineering group slashing another 500 jobs from its payroll.
Chief executive Brian Hodges blamed the end of the mining investment boom along with high costs and globalisation for the decision to cut a further 10 per cent of its workforce.
“It is a cyclic industry and currently it’s cycling down,’’ he said.
The news sent Bradken’s shares plunging 30¢, 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 company will now employ 4700 globally, 25 per cent below its 2012 peak.
More than half the cuts will be made in Australia during the next 14 months, targeting workers in Bradken’s manufacturing operations which supply large heavy metal equipment for machines used by miners.
Bradken last week announced the closure of its Henderson foundry in Perth, relocating that work to its foundry at Runcorn in Brisbane and its Xuzhou foundry in China.
Mr Hodges said the latest round of job cuts won’t have a negative impact on Queensland.
“There aren’t any job losses in Brisbane coming out of what was announced, in fact we are transferring some work into the Runcorn foundry,” Mr Hodges said.
He said it equates to about 30 jobs being added to the Runcorn foundry, which currently employs roughly 300.
Mr Hodges said although he thought the mining downturn had hit bottom and was recovering, he doubted Bradken’s smaller plants would ever be profitable because of high wage and energy costs.
“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 1400 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.
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.