NRW next in line for profits downgrade

West Australian earth-moving firm NRW Holdings joins a list of mining services companies announcing a profit downgrade.

The contractor’s net profit is predicted to dip by about 25 per cent in the year to June 30, between $73 million and $76 million.

This is down from $97 million in the previous year, The West Australian reported.

It said its revenue in the 2012/13 financial year would be around $1.3 billion, downgraded from between $1.4 billion and $1.5 billion.

This loss in revenue is predicted to continue into the 2013/14 financial year, according to NRW.

The mining contractor blamed contract and project delays for the downgrades.

It said hold-up in the awarding of contracts and the slowdown in the progress of projects had affected revenue.

A Financial Stability Review in March said mining services companies will have to bear the brunt of the slowdown in commodity prices but they are well placed to come out the other side.

The report said the sector is diversified enough to cope with the downturn in the mining sector.

“Because the earnings of the defined group of mining services companies are not solely determined by mining-related activities, the effect of any downturn in mining investment should be partially mitigated by demand from other sectors,” it said.

“Overall the mining services sector looks reasonably well placed to weather weaker demand for a period and it is therefore unlikely to pose a significant financial stability risk.”

But a report by insolvency firm FTI Consulting in May said many companies could go under in 2013 as mining peaks.

It added small miners that are not producing yet are vulnerable.

NRW follows suit of a host of mining services companies that downgraded their profits on the back of the slump in the mining sector.

Diversified engineering firm UGL issued a profits downgrade in May, with its underlying net profit after tax down from $168 million to $90 million.

Boart Longyear cut over 1000 jobs from its operations globally this year as the company predicted a steep drop in profits.

West Australian geology company Digirock said the downgrade points to a critical situation.

“We are bunkering down for the next two years,” Digirock managing director Peta Libby said.

“I think we are at the bottom, but we could stay at the bottom for a while.”

Perth has seen protests in the wake of the downturn. Unions recently barricaded the West Australian Parliament, according to the ABC.

They are demanding the State Government do more to protect workers from the mining downturn.

Mining-related construction firms are also preparing for job losses.

“There are many people who have been made redundant in the last couple of months out there looking for work.”

Transfield Services cut its profit estimates for the second time this year to as low as $62 million for the year to June. It had forecast $85-90 million earlier.

Analysts predict companies will undertake more job cuts.

But Deloitte’s Gary Dovan advised the industry has to get its balance back.

“We just have to get back…the supply and demand,” Doran said.

NRW’s shares slumped on the back of the news, closing off seven cents, or 6.48 per cent, at $1.01.

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