Downer EDI’s Profits Flatten Due to Mining Boom’s Demise

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Thursday, November 7th, 2013
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Engineering firm Downer EDI has announced that profit growth in 2014 will continue to be hampered by the ill-effects of the slump in the Australian resources sector.

The company has announced that it continues to anticipate a “flat” underlying net profit for the 2014 financial year as a direct result of weakness in the mining industry.

Downer EDI CEO Grant Fenn

Downer EDI CEO Grant Fenn

Speaking at Downer EDI’s annual general meeting chief executive Grant Fenn said that the 2014 financial year would see fewer large scale projects from the resources sector, as miners strive to cut costs and lift efficiency amidst difficult market conditions.

“As a result, there is a higher level of uncertainty in revenue for the 2014 financial year than in the prior year,” Fenn said.

Because of this uncertainty Downer currently maintains its guidance for full year after tax net profits of $215 million – the same as the company’s net profits before significant items for the 2013 financial year.

The slump in Australia’s mining sector has had a particularly adverse impact on the Downer’s rail business.

“Our locomotive business has been affected significantly by the drop-off in mining demand,” said Fenn.

Fenn nonetheless remains optimistic about the prospects of the company’s rail operations following an overhaul directed at tailoring services for both government and private clients.

“The transformation of our rail business will take some time. However, we believe there is a significant market for the rail services that we provide, particularly as state governments and private operators look to improve the efficiency of their operations and networks.”

Downer indicated that its Waratah train project remained firmly on track, with the provision of 59 out of a total of 78 eight-car passenger trains due for delivery to the Sydney rail network by the middle of 2014.

Despite the dour news for its profit growth the engineering firm has also announced new contracts worth $1.1 billion in the week leading up to its annual meeting in Sydney.

These include a $100 million contract obtained by the company’s DownerMouchel joint venture from NSW’s Roads and Maritime Services for the maintenance of the Sydney West Zone road network over a seven year period, as well as a contract worth $400 million for work on Western Australia’s Wheatstone LNG Project, involving the provision of two electrical and instrumentation packages.

 

 

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