Macmahon struggles in tough market
The company has quit the construction sector, opting to focus solely on contract mining, 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, increased competition for tenders along with margin pressure as a feature of trading conditions.
"The market is very tough and competition for new work is fierce," chief executive Ross Carroll told shareholders at the meeting, while pointing out the tender pipeline remains 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 contract renewals of $383 million playing a key role.
Even with the shift away from construction, Macmahon has an ongoing liability for projects for which warranties have been provided. It has also been hit by slow payments for mining projects, specifically the Tavan Tolgoi coal project in Mongolia.
Frequently Asked Questions about this Article…
Macmahon Holdings is facing a challenging year due to increased competition for new contracts and the continued volatility of commodity prices, which are putting pressure on margins.
Macmahon Holdings has decided to exit the construction sector and focus solely on contract mining, as the downturn in resource prices has led miners and explorers to aggressively cut costs.
Macmahon Holdings is addressing market competition by maintaining a high tender pipeline valued at $2.5 billion, despite the fierce competition for new work.
Macmahon Holdings has maintained its fiscal 2014 revenue forecast at $900 million to $1.2 billion, supported by $900 million of work in hand and contract renewals worth $383 million.
Even after exiting construction, Macmahon Holdings has ongoing liabilities for projects where warranties have been provided.
Macmahon Holdings is facing financial challenges due to slow payments for mining projects, particularly the Tavan Tolgoi coal project in Mongolia.
Macmahon Holdings views the current market conditions as very tough, with fierce competition for new work and continued volatility in commodity prices.
Contract renewals play a key role in Macmahon Holdings' financial outlook, contributing significantly to its revenue forecast by providing $383 million in secured work.
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