Transfield slumps to $247m loss in first half
The mining and construction contractor also cut its full-year net profit guidance, before adjustments, to between $85 million and $90 million due to the $284 million pre-tax impairment, first flagged last week. The first-half loss compares with a $32.7 million profit a year earlier.
But while the writedowns were well-flagged, investors were concerned with the company's outlook, which signalled continued weakness in parts of its US market.
"The decline in earnings in Easternwell arising from the weak minerals exploration market, and the impact on Timec from the slow economic environment in US refining, is expected to continue in the short term," Transfield said in a statement to the stock exchange.
Shares in Transfield fell 11.5¢, or 6 per cent, to $1.82 on Tuesday.
Chief executive Graeme Hunt said Transfield would look to sell non-core parts of the group, after undertaking a portfolio review since his takeover from Peter Goode last year.
These include Easternwell's mining exploration and marine businesses, the majority of Transfield's Middle East and Asia operations, as well as its 20 per cent stake in Ratch Australia.
Easternwell's remaining stronger-performing businesses will be integrated into the rest of Transfield's resources and energy division under the restructure.
Transfield declared an unfranked interim dividend of 3¢ a share, payable on May 1. This was down from 5¢ a share in the previous corresponding period.
Transfield said it expected earnings to recover next year by it cutting costs and increasing productivity, and refocusing its strategy to focus on high-value asset maintenance in the energy and infrastructure sectors, including government outsourcing.
The group has cut 270 jobs and reduced capital expenditure by 25 per cent since Mr Hunt was appointed.
Transfield's first-half net profit, excluding impairments and amortisation, was 38 per cent lower at $26.9 million, compared with the previous corresponding period.
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Transfield reported a $247 million first‑half net loss largely because of hefty writedowns tied to Easternwell’s drilling operations. The result reflects a $284 million pre‑tax impairment the company flagged, turning last year’s $32.7 million profit into a significant loss this half.
Transfield cut its interim dividend to an unfranked 3¢ a share, payable on May 1, down from 5¢ a share in the previous corresponding period.
After the $284 million pre‑tax impairment, Transfield trimmed its full‑year net profit guidance (before adjustments) to between $85 million and $90 million.
Investors reacted negatively to the results and outlook, with Transfield shares falling 11.5¢ (about 6%) to $1.82. The market was particularly concerned about continued weakness in parts of the company’s US operations.
Chief executive Graeme Hunt said the company will look to sell non‑core parts identified in a portfolio review. Targets include Easternwell’s mining exploration and marine businesses, most of Transfield’s Middle East and Asia operations, and its 20% stake in Ratch Australia. Stronger Easternwell units are planned to be integrated into the resources and energy division.
Since Graeme Hunt’s appointment, Transfield has cut about 270 jobs and reduced capital expenditure by 25%. Management says it will also cut costs, boost productivity and refocus on high‑value asset maintenance in energy and infrastructure to aid recovery.
On an underlying basis, excluding impairments and amortisation, Transfield’s first‑half net profit fell 38% to $26.9 million compared with the previous corresponding period.
Transfield warned the decline in Easternwell’s earnings is linked to a weak minerals exploration market, while Timec is affected by a slow US refining environment. Management expects these pressures to continue in the short term before recovery efforts take effect.
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