Mining engineering firm Ausenco has decided to give 500 workers the sack after the company’s shares plunged on a dismal profit downgrade.
The job cuts will primarily affect the Brisbane-based company's Australian workforce, as it endeavors to shift operations abroad in a bid to reduce costs. As a result of the retrenchments Ausenco's total employee numbers will fall to around 2800.
Ausenco says the job cuts have cost the company $5 million, but will bring in savings in overhead expenses of around $13 million in the second half of 2013, and between $20 million to $25 million from the following year onwards.
The relocation of a number of operations to "lower cost centres" is also set to reduce the company's expenses.
The heavy retrenchments come almost immediately following Ausenco's announcement of a shock downgrade in profit forecasts. The company says it will log net profits of only $6 million for the first half of 2013, falling well below market expectations and leading to sharp reduction in full year profit expectations.
JPMorgan had previously issued a first half profit forecast for Ausenco which was almost three times greater, pegging it at around $17 million.
The announcement marks the group's second profit downgrade since May, and led to a dive in share prices of over 30 per cent.
Ausenco now expects its full-year net profit to fall below both its previous guidance of $37 million to $42 million and the market consensus of $29 million to $41 million.
While most of Australia's mining services companies are doing it tough as a result of a worsening market conditions, Ausenco's profit downgrade came as a shock due to the perception amongst investors and analysts that the company's international operations left it better positioned to weather weaknesses in the local economy.
Craig Allen, Ausenco's chief financial officer, said the profit downgrade was significant of the harsher environment for resource companies, who are struggling to raise capital for fresh projects.
"Clients simply aren't making decisions at this point time or spending capital, Mr. Allen told The Australian.
"They're conserving their money...they're not pursuing brownfield projects."