Margins Under Pressure at Monadelphous

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Tuesday, February 17th, 2015
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Engineering group Monadelphous has suffered a 30 per cent slide in its half year profit and lowered its dividend as the mining investment downturn continues to bite.

Monadelphous made a net profit of $60.7 million for the six months to December 31, down from $87.1 million a year ago.  Revenue was down 17.5 per cent to $1.05 billion and the company said it expected its full year revenue to drop by between 15 and 20 per cent.

Monadelphous also lowered its fully-franked interim dividend from 60 cents to 46 cents.

Monadelphous says its profit margins are under pressure as market conditions in the mining and minerals industry remain challenging.  The engineering group has suffered a 30 per cent fall in first half profit and lowered its dividend as a result of the mining investment downturn.

The Perth-based company is dealing with tighter margins as competition increases for a smaller pool of work.  Managing director Rob Velletri said the company was focused on productivity improvements and cost reductions, with capital expenditure decisions delayed and operating expenditure tightened.

“The mining and minerals market remains subdued on the back of low commodity prices, and the recent sharp fall in the oil price has impacted negatively on the oil and gas sector,” Mr Velletri said.

“While opportunities for new major construction contracts have reduced, tendering continues on a number of iron ore, oil and gas and infrastructure projects.”

He said Monadelphous was focused on cutting costs and driving productivity improvements to protect margins.  The company has reduced costs by about $17 million and slashed its workforce by 20 per cent to 4,520 over the past year.

Monadelphous will focus on the further cost reductions in the second half.  The company made a net profit of $60.7 million for the six months to December 31, down from $87.1 million a year ago.

Revenue was down 17.5 per cent to $1.05 billion and the company expects its full year revenue to drop by between 15 and 20 per cent.

Monadelphous also lowered its fully-franked interim dividend from 60 cents to 46 cents.

The company expects 2014/15 full-year revenue to be around 15 to 20 per cent lower than the previous year.

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