WELLINGTON:Construction and infrastructure giant Downer EDI has reported a revenue and profit dip for its half-year trading.
Downer, for the half-year ended December, booked revenue of $A3.6 billion ($NZ3.78 billion), down 8.8% or $A345.1 million on a year ago. Earnings before interest and tax (ebit) was down 11.5%, from $A160.1 million to $A141.7 million. After-tax profit for the group declined from $A99.1 million to $A94.7 million.
Revenue from Downer’s New Zealand operations fared better, up from $A531.6 million to $A551.5 million, but ebit was down 35% to $A20.3 million, due to tightening profit margins and a reduction in ultra-fast broadband volumes. The company said yesterday ebit levels for the group were pared back 11.5%, to $A141.7 million, largely due to reduced activity in Australia. ”This was due to the completion of a number of projects and subdued end markets for Downer Infrastructure, losses incurred by the mining-related consultancy businesses, reduced volumes and project completions in Downer Mining, and the completion of the [Australian] Waratah Train Project,” the company’s directors’ report said yesterday.
Downer shares on the ASX declined 5.5% to $A4.25 after the update.Craigs Investment Partners broker Peter McIntyre said Downer was ”experiencing difficulties” in Australia, noting revenue declines in mining and rail down 20% and 28% respectively. ”Even though New Zealand [construction] is competitive, work in Auckland and Canterbury and strong GDP [gross domestic product] should have New Zealand operations performing well,” he said. Downer operates in market sectors including mining, rail, transport, utilities, telecommunications and engineering, construction and maintenance.
It employs about 20,000 people, mainly in Australia and New Zealand, but also the Asia-Pacific region, South America and southern Africa. Of its three divisions; infrastructure has $A11.2 billion work in hand, mining $A3.3 billion and rail $A3.5 billion.The revenue of Downer Infrastructure Australia declined from $A1.75 billion to $A1.73 billion, Downer rail from $A476 million to $A279 million, Downer Mining from $A995 million to $A782 million, while Downer Infrastructure New Zealand revenue rose from $A531 million to $551 million.
Mr .McIntyre noted Downer was making savings throughout the company, including subcontractor costs down 2.5% to $A757 million, raw material down $A130 million to $A332 million and plant and equipment down by $A130 million, to $A332 millionEmployee benefits expenses decreased 5% to $A1.3 billion, including redundancies, and represents 38.6% of Downer’s cost base, while communications, occupancy and professional fees decreased 11.5% to $A180 million, representing 5.6% of the cost base.
