Macmahon changes strategy, seeks cash
MINING contractor Macmahon Holdings is pulling out of construction and asking investors for $80.7 million as it tries to reverse a slide in earnings.
Macmahon outlined its new strategy to investors on Wednesday, saying it would become a dedicated full-service mining contractor. It has signed a $16.3 million deal with Leighton Holdings to take over the bulk of its construction projects, including equipment and staff.
It will also undertake a fully underwritten $80.7 million capital raising to strengthen its balance sheet after heavy write-downs on its construction business.
The moves come after a review of Macmahon's businesses and costs, which has led to the axing of up to 50 jobs.
Macmahon chief executive Ross Carroll said it had been forced to make substantial write-downs on its construction business and as a result the group's net profit for the 2013 financial year would be between zero and $25 million. Macmahon expects to be hit by restructuring, redundancy and closure costs of about $10 million.
Former CEO Nick Bowen shocked investors in September with a profit downgrade. Four weeks earlier, Macmahon had predicted a 20 per cent rise in profit.
But Macmahon has suffered cost overruns at its Hope Downs 4 rail project in Western Australia and expects fewer contract wins amid worries the mining boom is ending.
Mr Carroll said with the new strategy in place, Macmahon's mining business would deliver about $1.2 billion in revenue for 2013, increasing to $1.4 billion in 2014.
"Mining already has a secured order book of $1.9 billion and, with expected contract extensions and the anticipated award of the Christmas Creek Mine expansion contract, this figure is expected to rise to above $4 billion," he said.
The deal with Leighton is subject to shareholder approval at a meeting in February.