Downer keeps focus on selling ‘non-core’ mining business

Downer Group’s proposed divestment of its mining business remains “a key short-term objective” due to the capital-intensive nature of this part of the company.

The group has publicly explored the potential sale of its mining business over the past year. Last November, the company revealed that the mining business required more than 50 per cent of the group’s capital expenditure to achieve 12 per cent profit during the 2019 financial year.

Despite several enquiries and consideration from companies including Perenti, Downer stated that there was “no certainty any transaction will proceed”.

Downer suspended the mining business sale process during March due to market volatility caused by the coronavirus pandemic, which also caused Perenti to drop its interest.

In a review of its operations released on the ASX today, Downer identified both its mining and laundries divisions as “non-core businesses” that it planned to exit.

Once it begins the sale process again, Downer would be open to selling its mining portfolio in parts or in its entirety.

The Downer Group is also exploring opportunities to acquire facilities company Spotless, which it says will provide the company with “significant balance sheet facility and liquidity to complete an orderly exit of mining and laundries”.

Divesting the mining and laundries business will allow Downer to reshape the group and form a capital light service-based business model for lower risk and more predictable cash flow and revenue.

Downer also today announced plans to raise $400 million to support its acquisition of Spotless, strengthen its balance sheet and provide flexibility for continued investment in the company’s core businesses.

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