Engineering services firm Forge Group has seen its share price plunge after flagging further profit writedowns for one of its key power station projects.
Forge Group has announced that it expects to log a further $23 million to $28 million profit writedown on its trouble-plagued West Angelas Power Station (WAPS) project for Rio Tinto in the Pilbara.
In a statement made to the Australian Securities Exchange Forge said that the project would incur the additional costs as a result of unplanned scope and subsequent unplanned and extended delivery durations. The extra costs are expected to relate to additional engineering, construction and site establishment work for the extended delivery schedule.
Shares in the company had plunged over 14 per cent by the middle of the Tuesday trading session immediately following the announcement of the anticipated profit writedown.
The company has also announced that it does not expect to issue shareholders any dividends in the 2014 fiscal year.
The troubling news arrives less than two months after Forge suffered a staggering 83.6 per cent share decline in a single trading session, on the back of a $127 million writedown for two of Forge’s key power station contracts – the West Angelas Power Station and the Diamantina power station in Queensland’s Mt. Isa.
That single day share decline slashed Forge’s market capitalization by around $300 million, leaving the company worth only around $59 million.
The share plunge compelled Forge to seek a $60 million working capital facility from ANZ, in a deal which had the potential to eventually make the bank the company’s biggest stakeholder.
Forge recently managed to stage a partial come back after getting the go-ahead for the third phase of the $1.48 billion processing facility for Gina Rinehart’s Roy Hill iron ore mine. This spurred a 54 per cent leap in Forge’s share price, as well as prompted private equity giant BlackRock Group to acquire a stake in the company which conferred it with a 5.32 per cent voting right.
Forge now says that despite its travails financiers have agreed to maintain their support for the company by means of existing facilities. The engineering firm has also obtained new bonding facilities from its surety providers, in order to fully fund the third phase of the Roy Hill project.