Engineering giant Coffey International expects tough conditions to continue this year after logging a precipitous decline in first half net profits.
Coffey International’s results for the first half of the 2014 fiscal year indicate that the company’s net profits for the six months to December 31 2013 plunged by nearly 46 per cent year-on-year to hit $2.0 million, as compared to $3.7 million during the previous corresponding period.
Total revenues for the engineering group fell 10 per cent to $324 million, while underlying earnings before interest taxation depreciation and amortisation (EBITDA) gained 37 per cent to tap $15.1 million, although this figure excluded$3.6 million in restructuring costs.
The group flagged troubled waters ahead back in May 2013, unveiling a swathe of job cuts after ailing demand from the Australian resources sector left 54 of its geoscience projects were cancelled or delayed within the space of a mere month and a half.
At the time Coffey pointed to “deteriorating market conditions” as the chief reason for the retrenchments, with the Australian dollar riding high, commodity prices in the doldrums, and the political environment still highly uncertain in the lead up to the federal election.
Coffey subsequently axed a total of 170 positions in its geosciences division during the period from June to December 2013 to boost revenues by $141.1 million, and also slashed 30 jobs in its project management division, lifting its EBITDA to $300,000 as compared to a loss of $1 million the year previously.
Coffey’s international development also saw gains in EBITDA from $400,000 a year ago to $9.8 million. The division has emerged as the largest of the gropu’s three businesses, with revenues of $168.2 million.
Managing director John Douglas said that Coffey’s near-term performance will remain uncertain as difficult market circumstances persist.
“It is difficult to forecast second-half earnings performance in the face of what we regard will be continuing tough conditions,” Douglas said.
Douglas nonetheless pointed to the declining value of the Australian as one factor running in Coffey’s favour, making its geosciences business more competitive against companies from the Eurozone and North America when bidding for projects, as well as improving the profitability of the company’s offshore earnings when converting them back into Australian dollars.