Perenti has been hit by the skills shortage Credit: Unknown/Barminco
Mining services firm Perenti has become the latest victim of the skills shortage in WA’s resources sector, warning it expects labour market tightness to continue well into next year.
Shares in the contractor tumbled nearly 30 per cent yesterday after it flagged softer earnings as it grapples with the labour and wages squeeze.
Perenti chief executive Mark Norwell, pictured, said a tightening labour market in Australia was becoming “increasingly evident”.
“For Perenti, this is manifested in higher employee turnover rates, in wages growth and in business margins,” he said.
Combined with the impacts of COVID and a strengthening Australian dollar, the company warned of a “softening outlook for financial year 2021 and FY22”.
Like other companies, COVID-related border restrictions, snap lockdowns and mandatory quarantine periods have made it difficult for Perenti to source and mobilise labour from interstate and abroad.
Mr Norwell said the Federal Government’s Budget commentary this week had given the company no comfort that there would be “some abatement” of COVID restrictions during 2021.
“What we’re saying is we don’t see those restrictions easing throughout FY2022,, nor do we see the tightening labour market in WA coming off in a hurry.
“We think that’s going to be around for a fair portion of 2022.”
Perenti joins a chorus of voices sounding alarm bells about labour market shortages in WA’s resources sector.
Mineral Resources last month warned it would miss its full-year iron ore shipping guidance because of a shortage of truck drivers while Rio Tinto cited labour resource availability issues in maintenance.
Other companies to allude to a skills shortages have included goldminers Northern Star Resources and Regis Resources, US chemicals giant Albemarle, drilling firm DDH1 and contractor Monadelphous.
More than 20,000 jobs are being advertised online across the State — double the number of vacancies last May — with many of the most in-demand positions resources-related including mining engineers, mechanics, truck drivers, electricians and fitters.
Last week, WA Chamber of Minerals and Energy chief executive Paul Everingham said being cut off from an international labour pool had delayed some maintenance and shutdown work but that it had not yet risked the “healthy operation of resources projects”.
However, he said that was because miners could “afford to pay premiums”.
“The bigger, more financially robust companies tend to suck up a big part of the labour pool and the tier 2 miners then go, ‘where are we going to get ours’,” he said.
“Then they might look into construction and transport and start poaching people from other sectors. Unfortunately, then truck drivers that might have been driving trucks full of wheat or produce might not be in sufficient numbers as a result.
“Where the shortages show up is for farmers that can’t get truck drivers or construction projects that can’t get electricians or carpenters.”
Mr Norwell noted labour costs comprised about 30-40 per cent of Perenti’s cost base and said the company had been forced into “cap-in-hand options” with some clients to recoup the costs of increased travel management and quarantining of workers.
Perenti did not offer updated full-year guidance, but warned a 1¢ fluctuation in the forecast exchange rate from the end of March was expected to have a $1.4 million EBIT impact on an annualised basis given the company’s increased proportion of forecast US-denominated earnings.
Perenti in February reported first-half earnings before interest and tax — excluding a $88.1m hit taken on its exit from mining projects in West Africa in the wake of a fatal terrorist attack in November 2019 — of $93.8m on revenue of $1.06 billion.
It had expected second-half results to be similar.
On the plus side, Perenti said it had secured more than $700m of contract work since January and was continuing its move into the North American underground market.
Perenti also said it had increased its growth pipeline by more than 20 per cent and was working to convert those growth opportunities into work in hand.
“While I am pleased with our achievements during the third quarter, it is unfortunate that these positive catalysts have coincided with the continuation of a challenging backdrop,” Mr Norwell said.
He said he was confident Perenti would continue to manage the acute impacts of its current challenges to deliver on its growth aspirations and generate long term value for shareholders.
Perenti shares closed down 28.5¢ at 69¢, less than half the $1.50 it was trading at just three months ago.
PRN Price at posting:
69.0¢ Sentiment: None Disclosure: Held
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