The world’s largest drilling company Boart Longyear has shocked the market by sacking its chief executive in an attempt to tackle its plunging share price.
American Craig Kipp’s tenure at the Utah-based, Australian-listed company is over after four years in what was a board decision, possibly influenced by investors.
It was a surprise announcement since Mr Kipp delivered a record half year net profit of $95.1 million on August 30 to follow a record full year profit of $150 million in February.
However almost $406 million was wiped from Boart’s market value that same day in August, when its share price plunged 37 per cent from $2.38 following a sharp cut in profit guidance.
The stock hit a low of $1.11 on September 5 and has since only recovered less than half of the losses to close 1.5 cents stronger at $1.675 today.
Mr Kipp also painted a bleak outlook for mining when he announced the company’s profit result in August, warning miners were taking less risks which then meant less expenditure for the exploration work Boart did.
Boart’s director of corporate communications Monika Portman said the board’s decision to let Mr Kipp go was mostly related to the share price.
"It is unusual and everyone at the organisation is clearly shocked by it after delivering a record performance in 2011 and the first half,” she told AAP.
"Unfortunately we just haven’t seen the share price reflect that and at the end of the day when you are a public company you have got to deliver to the shareholders and the board just felt like that wasn’t getting done."
Chairman David McLemore will serve as acting chief executive and executive chairman while a search for a replacement gets underway.
He would make tweaks but would not dramatically change a strategy of organic growth, geographic expansion and expanding the business’s mine water services, involving removing bore water from mines, Ms Portman said.
Mr McLemore paid tribute to Mr Kipp, saying he had led “the company’s transformation into the global industry leader and standard setter it is today."Boart operates 1200 rigs in 40 countries and is seen as a bellwether of resources capital expenditure.
Fellow contractors Macmahons and NRW have cut profit forecasts in recent weeks due to major miners BHP Billiton and Fortescue putting expansions projects on hold.
Patersons Securities industrial analyst David Gibson said he was surprised by the departure as he believed Boart had been conservative in its outlook and there were upsides to the mining sector next year.
"Management have been quoted recently in some broker research saying they’ve been told by their clients (resources companies) to prepare for 2013 as if it’s 2012,” he told AAP.
"That would imply the company is very cheap (share price) if that were the case."
He said the company had done the right thing downgrading guidance, to meet continuous disclosure obligations and to set the bar low.Mr McLemore said today the company continued to trade in line with its guidance issued in August of earnings before interest, depreciation and amortisation for 2012 at $US360 million ($A352.41 million ) to $US390 million ($A381.77 million).