Engineering group Downer EDI is warning of further hits to come as belt tightening in the mining sector contributed to a three per cent fall in annual profit.
Downer made a net profit $210 million in the year to June 30, and expects that to fall to around $190 million in 2015/16. Its shares plunged 11.35 per cent, losing 52 cents to $4.06.
“It looks like the markets have viewed it as a downer,” OptionsXpress market analyst Ben Le Brun said.
The 2014/15 results were in line with expectations, but uncertainty was likely to be a running theme in the mining services sector over the next month, he said.
“There’s no end in sight to the pain and the squeeze on the sector overall. Downer’s underlying business is still under serious pressure,” Mr Le Brun said.
The company’s mining division, which carries out contract mining and earthmoving, suffered a 20 per cent drop in revenue in the year to June to $7.4 billion, the main driver of a four per cent decline in total revenue.
Falling commodity prices, project completions and the early termination of a contract at the Goonyella Riverside coal mine were behind weaker mining revenue.
“We expect the current low levels of mining related capital expenditure to continue through 2016 and customers across the board to focus on costs and efficiency as the broader economy feels the impact of low commodity prices,” Downer said in a statement.
MINING DOWNTURN CASTS A CLOUD OVER DOWNER
- Full year net profit down 2.7 pct to $210.2m
- Revenue down 3.9 pct to $7.4b
- Dividend unchanged at 12 cents, fully franked