Mining slump, lost contract bad news for Macmahon
The company's outlook for the new financial year was also negative as it warned it was at risk of losing contracts in a difficult and competitive mining market.
Macmahon posted a net loss of $29.5 million, worse than an expected loss of $10 million to $20 million and compared with a $56.1 million profit a year ago.
The company's shares closed down 3.5¢, or 20 per cent, at 14¢.
The shares were nearly four times that at 56¢ at the end of August last year, but the company has performed poorly since then.
The weak performance includes a net loss of $73.1 million from its construction business that it sold to Leighton. But the mining business' after-tax profit of $43.6 million was lower than analysts' forecasts of $47.4 million.
It has had to make non-cash provisions for disputed claims, higher doubtful debts and asset impairments, the company said.
"The recognition of these provisions reflects the current economic uncertainty affecting the sector," it said.
It also warned it might lose its contract operating Yancoal's Cameby Downs mine that is due for renewal in November, while lowering revenue expectations for others and facing more competition for new work.
Macmahon had a shaft-sinking contract at the CSA Cooper mine in NSW abruptly cut in June, which it had forecast to contribute $80 million of revenue this year.
Revenue was 33 per cent higher at $1.2 billion and it has forecast revenue of $900 million-$1.2 billion this year, but says that is uncertain.
Chief executive Ross Carroll said the company had reduced risk by offloading the construction business and the company was one of few mining services groups to grow revenue and its order book.
"We are now better positioned to manage current market challenges and to deliver more sustainable returns for shareholders," he said.
Frequently Asked Questions about this Article…
Macmahon reported a worse-than-expected net loss of $29.5 million, compared with a $56.1 million profit a year earlier. The result was hit by non-cash provisions for disputed claims, higher doubtful debts, asset impairments and a $73.1 million net loss from the construction business it sold to Leighton.
Shares tumbled after the disappointing result and a negative outlook. The stock closed down 3.5¢ (20%) at 14¢. Investors reacted to the unexpected loss, weaker mining profit versus forecasts and warnings the company could lose contracts in a tougher market.
Macmahon's mining business posted an after-tax profit of $43.6 million, which was lower than analysts' forecasts of $47.4 million, contributing to the overall weaker-than-expected financial result.
Yes. The company warned it could lose the contract to operate Yancoal's Cameby Downs mine when it is up for renewal in November. Management also flagged increased competition for new work and lower revenue expectations for some contracts.
A shaft-sinking contract at the CSA Cooper mine in NSW was abruptly cut in June. Macmahon had previously forecast that work to contribute about $80 million of revenue this year, so the cut materially weakened near-term revenue expectations.
Macmahon forecast revenue of between $900 million and $1.2 billion for the coming year, but said that this guidance is uncertain given current market conditions and contract risks.
Management says selling the construction business has reduced risk and left Macmahon focused on mining services. The construction unit had produced a $73.1 million net loss before the sale, and the company says the restructure helps it better manage market challenges.
Investors should monitor contract renewal outcomes (especially Cameby Downs), any further contract cuts or cancellations (like the CSA Cooper change), updates to revenue guidance, contested claims or provisions, and commentary on the order book and competition in the mining services market.
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