The engineering group said that it expects to meet its full-year net profit target after H1 profits came in slightly ahead of forecasts.
For the six months to December 31 Downer EDI posted a profit of $99.11 million after significant items, for a 5.4 per cent increase compared to the $94.04 million that the company raked in during the first half of the preceding fiscal year.
Downer’s performance was also significantly ahead of market expectations, which anticipated a December half net profit of approximately $95 million.
The healthy profit figure puts Downer firmly on track to meet its net profit forecast of $215 million for the year to June, given that analysts had the company making approximately 45 per cent of its full year profit in the December half.
Downer managed to achieve the modest profit increase despite a sharp decline in revenues during the same half, with a fall of 16.7 per cent to $3.76 billion, compared to $4.53 billion from the prior corresponding period.
The mining division logged the biggest decline, with revenues plunging 23.2 per cent to $1 billion, while the rail division also struggled, seeing a drop in revenues of 19.3 per cent to $600 million.
The infrastructure division – Downer’s stalwart area of operations, saw revenue decline by 12.6 per cent to hit $2.3 billion.
Earnings before interest, tax, depreciation and amortisation also slid significantly, falling to $297.5 million from $324.2 million during the corresponding period the year previously.
The company said that the ability to achieve a modest improvement in profits despite major declines in revenues and earnings was the result of its efforts to lift productivity and slash costs.
“Despite the decline in total revenue and EBIT, the focus on cost reduction, productivity and capital management has delivered an improved net profit after tax (NPAT) result,” Downer EDI said.
Downer also indicated that it would likely refrain from bidding for beleaguered Western Australian engineering firm Forge Group, which continues to suffer from difficulties in relation to several of its key power station projects.
CEO Grant Fenn said that launching a taking-over of trouble-plagued company is “fraught with difficulty,” and that “you need to do very extensive due diligence.”