Downer EDI flags further profit drop

Downer EDI has flagged a further fall in profit due to the downturn in the resources sector.

The engineering firm posted a net profit $210 million in the year to June 30, but expects that to fall to around $190 million in 2015/16.

"Providing guidance for the 2016 financial year has proven more difficult than in the past five years," Downer’s chief executive Grant Fenn said.

"There is weakness and a high degree of uncertainty in a number of our end markets, particularly resources-based construction and mining.

"We expect the current low levels of mining-related capital expenditure to continue through 2016 and customers across the board to focus on costs and efficiency as the broader economy feels the impact of low commodity prices.”

The company said it would continue to focus on cash and capital management which has resulted in net finance costs reducing by 30.5 per cent to $29.9 million.

Downer’s work-in-hand was $18.5 billion at 30 June 2015, an increase of $0.5 billion from 31 December 2014.

Mining’s total revenue declined 19.8 per cent to $1.59 billion and EBIT was 22.6 per cent lower at $132.6 million reflecting a number of contract completions and volume reductions. 

Downer said there were also fewer opportunities for the blasting business and pricing pressure on Ammonium Nitrate supply, which placed further pressure on earnings.

“The mining business continues to work very closely with its customers and remains Australia’s contract miner of choice,” Downer said.

“The Snowden consultancy now forms part of Downer’s mining services offering, helping to expand its front end solutions capability. 

“Downer is now also providing asset management services at a number of sites as customers look to improve their fleet utilisation.”

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