Downer Group chief executive Grant Fenn is mulling over the future of the contractor’s mining business, stating that it is “very capital-intensive.”
The company announced in August that it was undertaking a portfolio review to identify any opportunities for realignment. Fenn confirmed that the mining business became a focus area.
Fenn said Downer’s mining business was a leader in Australia, with excellent people and a strong and proven track record.
“However, it is also very capital-intensive,” he said.
“Mining contributed about 12 per cent of Downer’s profit in the 2019 financial year but required more than 50 per cent of the group’s total capital expenditure to achieve that result,” Fenn said at Downer’s annual general meeting.
Downer’s mining portfolio experienced an increase of revenue by 8.8 per cent to $1.5 billion in the 2019 financial year compared to the previous corresponding period.
The company attributed the hike to increased activities at the Blackwater mine (BHP Mitsubishi Alliance) in central Queensland and Carrapateena (OZ Minerals) in South Australia, in addition to newly commenced contracts.
On the other hand, Downer’s Urban Services business continues to contribute increasing proportion of its earnings, representing 83 per cent of Downer’s earnings before interest, tax and amortisation (EBITA) in the 2019 financial year.
Downer continues to advance its portfolio review and will provide an update of any significant developments.
Its mining business is servicing over 50 sites in Australia, Papua New Guinea and Southern Africa, including at Newcrest Mining’s Cadia Valley underground mine in New South Wales and BHP’s Goonyella Riverside, Daunia, Peak Downs and Saraji mines in the Bowen Basin region of Queensland.