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In light of further softening in the Australian market and lower commodity prices, Emeco has lowered its operating net profit after tax expectations for the first half of 2013 from $29.2 million to a range of $23 million to $26 million.

Emeco said it had been working closely with its customers as they adjusted to an environment of lower commodity prices, with utilisation in its Australian business now sitting at 66%, down from the 76% reported in its full year results in August.

The decline in utilisation was caused by a combination of contracts ending in line with slowing activity in the Australian market.

Sustaining capital expenditure in FY13 was now expected to be approximately $80 million, down from previous guidance of $120 million, due to the lower than expected utilisation.

In an effort to adjust operating and capital costs, Emeco has removed it sub-contract labour, reduced parts expenditure and made overhead reductions.

The company said while its offshore businesses were prudently managing costs, the cost initiatives were most relevant in Australia where the utilisation outlook was less certain.

Over the past few months Emeco had suffered from equipment being off-hired by a major miner and mining contractors, as contracts were reviewed during a period low iron ore pricing.

The company said it was unlikely the equipment would return to work at its major customers’ sites in Western Australia, during this half of the financial year as previously expected.

Any return to work of the equipment was not expected until the second half of the financial year.

Emeco was also affected by two customers in the Australian gold sector downsizing their operations and being unable to extend their contracts.

“While we are seeing some utilisation challenges in Australia as a results of lower commodity prices and subdued mining activity, strong trading conditions Canada and Chile, together with a solid customer base in the Indonesian business, is expected to help offset some of this softness,” Emeco managing director and chief executive officer Keith Gordon said.

Equipment contracts in Canada, Chile and Indonesia had all increased, with Emeco holding a more positive forecast for its FY13 earnings surrounding operations in these countries.

The company said it would continue to pursue the benefits of a geographical diverse portfolio, while facing limited visibility in the Australian business.

Emeco was not able to predict the changes to its full year guidance at this stage.