MARKETS SPECTATOR: Outback alternatives

Infrastructure and environmental services company Cardno is warning that the outlook for Australia's mining sector is worse than elsewhere.

Andrew Buckley, chief executive of Cardno, is nothing if not frank.

Buckley says about 10 per cent of its revenue, forecast to be more than $1 billion in the 12 months to June 30, comes from mining. That sector is now “entering a more difficult phase”, he says.

Cardno’s electrical engineering business in Perth has been suffering from project deferrals, delays and cancellations by iron ore and coal miners. The company’s Virginia, US-based coal business is part of a global downturn that is worse in Australia than anywhere else.

Cardno told the ASX today it expects to report a net profit of between $73-$77 million in 2013. Buckley told Markets Spectator the market had expected a net profit from the company of $81-$82 million.

Revenue has increased as much as 30 per cent for some of Cardno’s business units but margins are being “squeezed", says Buckley. The “high” Australian dollar, the expensive costs of doing business in Australia and inflexible labour laws have “pushed the big miners to look at other locations where costs are lower", he says. Africa is one destination the global mining giants are investing in at the expense of Australia, according to the Cardno chief.

“The mining story is a bit negative but more negative in Australia,” says Buckley.

At 3.30pm AEST, Cardno’s shares were down 5 cents, or 0.9 per cent, to $5.45, after earlier falling to a 52-week low of $5.35. The stock is down 22 per cent in the year to date and 24 per cent in the last 12 months.

At the same time the S&P/ASX 200 Index was down 11.157, or 0.2 per cent, to 5168.90. It has risen 11 per cent in the year to date and 25 per cent in the last 12 months.

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