The wheels are falling off some of Australia’s industrial success stories of the past decade as the global credit crunch and recession takes its toll across industries and regions.
Qantas this week revealed a slump in earnings (that would have been a loss except for a convenient accounting change), 1750 job cuts, plane sales, delays to purchases, capex cuts and other cost savings initiatives.
This morning OneSteel, the country’s second biggest steelmaker and part of the old BHP Steel business (along with rival BlueScope), revealed a near halving in expected profits for 2009, a capital raising of more than half a billion dollars. It didn’t mention job cuts or other moves, but the fine print of the announcement warned of “substantial” restructuring costs to come and possible “impairment charges” that the company failed to expand upon. On Tuesday, OneSteel asked for a trading halt to give it time to make a statement on its financial position — this morning, that statement came alongside a profit downgrade and talk of cuts and other moves to lower costs. But compared to the announcement that Qantas trotted out on Tuesday morning, the OneSteel halt was light on detail and you were left wondering if the board and management suddenly awoke on the first trading day after Easter to discover the cupboard was bare. Qantas managed, unfortunately for those involved, to detail job losses of up to 1750 in management and staff through attrition and changing working hours, plus scrapping capacity, grounding plans, cutting capital spending and a series of other cost cuts. And that will mean jobs will have to go at its blast furnace and iron ore mining operations at Whyalla in South Australia, at its electric arc furnaces in Melbourne and a similar operation in Sydney at Rooty Hill.
Meanwhile, Leighton Holdings, the country’s dominant civil engineer and contractor, has dumped its second huge construction project in the faltering Gulf state of Dubai in three months as the country suffers from a collapse in building and credit. it withdrew with its South African partner from the Trump Tower project in February. It was a $2.9 billion deal all up and Leighton has at least four other projects worth more than $4 billion in Dubai. No wonder Leighton and its Thiess John Holland subsidiary were so eager to pay Nicholas Bolton to end his irritating assault on BrisConnections. BrisConnections is a $4.7 billion deal, the largest in Australia. Losing that; on top of the falling level of work from the contract mining business, especially in Australia, and from the slowing pace of business in India and the Middle East, would have driven a big red hole through the 2009 results of Leighton and beyond.
Iluka, the world’s biggest beach sands minerals miner and exporter (rutile, zircon) revealed a 70% plunge in third quarter sales revenues and a near 24% fall in output as the slump in global industrial production slashed demand for paint and titanium and other products made from its products. And PMP, the struggling Melbourne-based printer is sacking another 67 people, this time in Victoria, on top of the 86 sacked in Queensland and Adelaide a month ago. It also warned that its second half result would be worse than the first half drop in profit of more than 30%. The company said the sackings would cost an extra $4.5 million. In each case there’s a direct link to the dual effects of the credit crunch and then the recession which is cutting demand for a wide range of products — from property, to travel, steel, cars, planes, coal, iron ore and so on.