Contract miner Macmahon warns of challenging times
The company has quit the construction sector, opting to focus solely on contract mining at a time when the downturn in resources prices has resulted in miners and explorers aggressively cutting costs.
At Friday's annual meeting the company pointed to the continued volatility of commodity prices and increased competition for tenders along with margin pressure.
"The market is very tough and competition for new work is fierce," chief executive Ross Carroll told shareholders, while pointing out the tender pipeline remained high at $2.5 billion.
Its caution on the outlook prompted it to maintain unchanged its fiscal 2014 revenue forecast at $900 million to $1.2 billion, even though when it released its annual report in September, it said it had $900 million of work in hand, with renewals of $383 million playing a key role.
Even with the shift away from the construction sector, Macmahon has a continuing liability for projects for which warranties have been provided.
At the same time, it has been hit by slow payments for mining sector projects, specifically the Tavan Tolgoi coal project in Mongolia.
It is also involved in litigation after the suspension of work on the sinking of a shaft in Cobar, NSW, over a claim for unpaid work.
Frequently Asked Questions about this Article…
Macmahon Holdings is experiencing challenging times due to increased competition for new contracts and the ongoing volatility of commodity prices. This has led to margin pressure and a tough market environment.
Macmahon Holdings has decided to exit the construction sector and focus solely on contract mining. This shift comes as a response to the downturn in resource prices and the need for miners and explorers to cut costs aggressively.
Despite the challenging market conditions, Macmahon Holdings has maintained its fiscal 2014 revenue forecast at $900 million to $1.2 billion. The company has $900 million of work in hand, with renewals of $383 million playing a key role in its financial strategy.
Macmahon Holdings is dealing with slow payments for the Tavan Tolgoi coal project in Mongolia and is involved in litigation related to the suspension of work on a shaft sinking project in Cobar, NSW.
Macmahon Holdings' tender pipeline remains robust, valued at $2.5 billion, despite the fierce competition for new work in the contract mining sector.
Even after exiting the construction sector, Macmahon Holdings retains liabilities for projects where warranties have been provided, which continues to impact its financial obligations.
Macmahon Holdings faces challenges with international projects, such as slow payments for the Tavan Tolgoi coal project in Mongolia, which affects its cash flow and financial stability.
Macmahon Holdings is focusing on maintaining a strong tender pipeline and leveraging its existing contracts to navigate the competitive contract mining market, despite the tough conditions.
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