Engineering firm Downer EDI has lifted its full year profit target despite uncertainty around some of its major mining customers.
Downer says it’s raised its 2014/15 full year net profit target to $210 million, from $205 million, following its $300 million acquisition of unlisted contractor Tenix Holdings.
That will reflect eight months of Tenix trading, as well as transaction costs, amortisation and taxation.
Downer also plans to continue cutting operating costs and improving efficiencies in its mining division as weaker commodity prices, particularly coal and iron ore, weigh on the sector.
“Underlying mining commodity markets are currently very difficult for a number of our major customers,” Chief executive Grant Fenn told the company’s annual general meeting on Wednesday.
“The short-term impact of this pressure on service providers like Downer is hard to predict.”
But, he said, over the longer term, this pressure would drive demand for the company’s services as companies look for more efficient service delivery.
Downer suffered a 22 per cent fall in revenue over the previous financial year but recently won a four-year $500 million contract with iron ore project Roy Hill and a $170 million contract at the Chevron-operated Gorgon gas project in Western Australia.
It has also picked up a $70 million contract with Crocodile Gold Corporation and a $200 to 250 million contract extension at the Commodore coal mine in Queensland.
Downer made a net profit of $216 million for the 12 months to June 30, up 5.9 per cent.