Transport contractor McAleese has warned of a massive earnings drop due to the impact of its altered contract with Atlas Iron.
The company, which hauls ore from Atlas’ mines to port, announced underlying full-year earnings were expected to fall to about $70 million from $85.3m in 2013-14.
This is $20 million lower than the group’s February forecast of $85m and $90m in underlying earnings this financial year.
The company suffered a 49.4 per cent drop in the price of its shares yesterday on the back of the news and closed at 8.1c.
The trouble started for McAleese when Atlas decided to close its Pilbara mines in April in light of the falling iron ore price.
Since then McAleese has struck a deal with Atlas which will see it continue to haul ore from the Abydos and Wodgina mines during May.
This will allow Atlas to keep mining, but will mean a lower base haulage rate for McAleese with profit share dependant on the price of iron ore.
McAleese said discussions around the potential recommencement of mining at the Mt Webber mine were ongoing.
The company also announced a review of its heavy haulage and lifting division was ongoing, with a non-cash impairment likely.
“The expected non-cash impairment reflects low activity levels and a reduced pipeline of capital projects in the resources and infrastructure sectors across Australia,” McAleese said.
McAleese has appointed financial advisers 333 Group to provide an independent review of its financial performance.
“This review has commenced and will assist with developing robust and sustainable plans beyond the immediate initiatives,” the company said.