Engineering services firm WorleyParsons plans to retrench more than 2,000 workers with the expectation that tepid business conditions will continue for the global mining and resources sector.
The proposed layoffs come in response to the ongoing soft performance of commodities, which has heavily affected the company’s operations since February. According to management these ailing prices have left margins in North America particularly hard hit.
“WorleyParsons is taking further action to adjust its business to market conditions,” said a company spokesperson.
The upcoming round of retrenchments adds considerably to the 4,000 jobs that were cut by the WorleyParsons last year, as part of a major restructuring intended to deal with the impact of the mining boom’s demise.
The company foresees one-off charges worth $125 million in total for the 2015 fiscal year, as a result of redundancy costs related to the slated layoffs, as well as heavy lease charges and increases in general project provisions.
As a result of these costs the company currently see statutory earnings during the second half of the 2015 fiscal year of only 50 per cent those posted for the first half.
WorleyParsons’ management hopes that the implementation of tough measures in the short-term will cut down on long-term costs, providing future annualized savings of between $75 million and $100 million in the 2016 fiscal year.
The engineering services company has already requested that its shares be suspended from trading as it apprises the market of the upcoming profit drop.
WorleyParsons’ net profit for the half ending December 31 was $104.3 million, representing a decline of 7 per cent compared to the $112.1 million in earnings logged during the prior corresponding period.
The growth slowdown in emerging economies as well as excess production and a resurgent greenback have weighed heavily on commodities prices, with the effects keenly felt by the global mining and resources sectors.
Analysts such as PIMCO’s Mihir Worah, claim that commodities are bottoming out as suppliers make adjustments in response to reduced demand. A V-shaped recovery is not anticipated, however, with gains in price levels still stymied by weaker global worth.