Downer hit by mining slowdown

Maintenance and engineering firm maintains 'flat' guidance as rail business adjusts.

Engineering and maintenance firm Downer EDI (DOW) says it will take some time for its rail business to adjust to the slowdown in the mining sector.

The company also said it still expects to deliver a "flat" underlying net profit in the 2014 financial year.

Downer supplies and maintains passenger and freight train rolling stock in Australia.

"Our locomotive business has been affected significantly by the drop-off in mining demand," Downer EDI chief executive Grant Fenn told shareholders at the company's annual general meeting.

"The rail division is going through substantial change, with a strong focus on productivity.

"The transformation of our rail business will take some time. However, we believe there is a significant market for the rail services that we provide, particularly as state governments and private operators look to improve the efficiency of their operations and networks."

Downer said significant progress had been made on the Waratah train project – under which Downer is delivering 78 eight-car trains for Sydney's rail network – over the past year.

Downer had delivered 59 passenger trains so far, and the 78th train was due for delivery in the middle of the 2014 calendar year.

Downer reiterated its belief that the 2014 financial year would be characterised by fewer major capital works in the resources sector, more emphasis by mining customers on optimising their volumes and production costs, and budgetary pressure on government expenditure on road and rail maintenance.

"As a result, there is a higher level of uncertainty in revenue for the 2014 financial year than in the prior year," Mr Fenn said.

"Our results in the first three months of the 2014 financial year have been to plan. Therefore, at this point, and despite future market uncertainties, we maintain our guidance for the full-year result of net profit after tax of $215 million."

Downer booked a net profit after significant items of $204 million for the 2013 financial year, and a net profit before significant items of $215 million.

Shares in Downer were steady at $5.28 at 1048 AEDT.

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