UPDATE 2-Joy Global warns on revenue as coal glut hits orders
* Third-quarter earnings $1.71/share vs $1.81 a year earlier
* Orders drop 36 pct; warns of more weakness
* Warns revenue slide to carry on into next year
* To step up cost cutting; shares down 5 percent
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 5 percent before the bell as the chief executive warned revenue next year could drop a further 20 percent, on top of an already forecast fall this year.
Mounting coal stockpiles have prompted some of the world's largest coal producers, such as Peabody Energy Corp and Alpha Natural Resources Inc, to cut demand for mining equipment.
Joy Global 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 it 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.
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.
HIGHER COST CUTTING
Joy Global, which began restructuring its business in the second half of 2012, said it was stepping up cost cutting to adjust to the lowered outlook for 2014.
Cost of sales fell 3.6 percent to $880.2 million in the third quarter. Product development, selling and administrative expenses dropped 7 percent.
The company'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 traded at $48.73 before the bell on Wednesday. The stock has dropped about 20 percent this year, far short of the 14 percent rise in the S&P 500 index.