* Third-quarter earnings $1.71/share vs $1.81 a year earlier
* Orders drop 36 pct and weakness to persist
* Warns revenue slide to carry on into next year
* Analyst sees further cuts to revenue outlook
* To step up cost cutting; shares down 3 percent
By Sagarika Jaisinghani
Aug 28 (Reuters) - Joy Global Inc, a maker of mining equipment, reported a 36 percent slide in quarterly orders and warned of sharply lower revenue for a further year as coal producers cut back capital spending in the face of a supply glut and low prices.
Joy Global, which derives two-thirds of its revenue from sales to coal miners, said it would increase cost cutting to offset the slide in orders.
Its shares fell as much as 6 percent in early Wednesday trading, but eased a little after the company said it expected larger savings from its restructuring programs.
Joy Global launched cost cutting measures in the second half of 2012 as low coal prices began eating into sales. It warned on Wednesday revenue next year could drop a further 20 percent, on top of an already forecast fall this year.
The company’s plunge in orders do not bode well for Caterpillar Inc, the world’s largest maker of mining and construction equipment. Its shares fell 1 percent.
“Given (Joy Global‘s) weak order book and a backlog that is now essentially down to one quarter’s worth of revenue we believe there will be additional revisions to forecasts for 2014/2015,” Jefferies & Co analyst Stephen Volkmann wrote in a note.
The company’s backlog has dwindled as mounting coal stockpiles prompt some of the world’s largest producers, such as Peabody Energy Corp and Alpha Natural Resources Inc , to cut spending on mining equipment.
Joy Global’s backlog fell 27 percent to $1.6 billion at the end of the third quarter.
The company maintained its forecast of revenue for the year to October 2013 of $4.9-$5 billion, down from last year’s $5.66 billion, and warned the following year would be worse.
“The current outlook (for 2014) is unlikely to support annual revenue above $4 billion,” Chief Executive Mike Sutherlin said in a statement.
This is sharply lower than the previous average expectation from analysts for revenue of $4.57 billion for the year ending October 2014, according to Thomson Reuters I/B/E/S.
“If order rates stay at current levels, 2014 revenues could come in as much as $1.5 bln below Street estimates,” Volkmann said.
Joy Global said its customers have reduced capital expenditure by as much as half and it expected spending to remain at this level until demand improves.
Aftermarket sales, which include maintenance and repair services and make up about half of sales, have also been hit.
“Our aftermarket will continue to see headwinds as mines are taken out of production and volumes decline to balance the market,” Sutherlin said.
Rival Caterpillar slashed its outlook for 2013 in July, but said it was unlikely that dealers would continue to reduce machine inventory in 2014, given the scale of the expected decline in 2013.
“Caterpillar’s thesis that mining revenues could be up in 2014 due to lack of inventory reduction does require orders to improve from recent levels, and Joy Global’s results show no sign that this is happening yet,” Volkmann said.
Joy Global expects to save $65 million from the second phase of its cost cutting plan, above the $40 million it had earlier expected, Chief Financial Officer James Sullivan said on a post-earnings conference call.
Sullivan also said the company would generate another $15 million in savings from a fresh restructuring program in 2014.
CEO Sutherlin said that while he expected orders in the current quarter to be above those booked in the third quarter, they would still be below the average run rate of previous quarters.
Joy Global’s orders fell 36 percent to $695 million in the quarter ended July 26.
Net income fell 5 percent to $183.2 million, or $1.71 per share. Revenue dropped 5 percent to $1.32 billion.
Excluding items, Joy Global earned $1.70 per share.
Analysts on average expected earnings of $1.37 per share, excluding items, on revenue of $1.18 billion.
Joy Global maintained its 2013 forecast for earnings of $5.60-$5.80 per share.
The company’s shares were down 4 percent at $49.45 on the New York Stock Exchange on Wednesday. The stock has dropped about 20 percent this year, far short of the 14 percent rise in the S&P 500 index.