Shares in building and engineering services provider Norfolk Group plunged 21% yesterday after the company joined the slowing gathering pack of groups downgrading their 2009 earnings.
The company told the ASX yesterday that it will not meet its earnings target this financial year as it continues to be affected by a weak construction and building market in New Zealand.
Norfolk had been targeting a 10% increase in earnings before interest and tax (EBIT) from the 2008 result of $34.3 million, but now says it expects a flat result in 2009.
"Norfolk believes it will not achieve the target of a ten per cent increase in EBIT on the 2008 financial year as previously stated," it said.
"With no further delays in significant projects or further worsening of current market conditions, Norfolk believes it will achieve an EBIT result for the 2009 financial year similar to that of the 2008 financial year."
The shares dropped 22c or 22.2% to 77c, the day’s low. The high was the $1 opening quote.
Norfolk said that earnings for its March 31, 2009 year will be weighted more heavily to the second half of the year than in recent financial years.
Key factors working on the first half weakness included negative growth in New Zealand, delays in the award of some projects and later start dates on other projects.
As well the turmoil and rising problems in global financial markets were continuing to affect the company, as the AGM had been told earlier in the year.
"Since that time, instability in global financial markets has intensified and the New Zealand construction and building sector has weakened further."
(The NZ economy is now in a recession with the country reporting negative growth in the first half, and the country’s Treasury Department Monday cutting its overall growth target for the year to just 0.1 %.)
Norfolk said it had secured $32 million in project wins in Sydney, Newcastle and regional Western Australia in the commercial construction, health facility construction and rail sectors.
Meanwhile better news from Perth-based engineer and contractor, Monadelphous Group which yesterday revealed a nice $140 million contract win with the Worsley Alumina project in Western Australia.
But the news did nothing for the shares and they dropped by around 3% to $11.13, after hitting a day’s low of $10.50 in the big morning sell-off. But in the post 1% rate cut euphoria, the shares rose solidly, closing up 3%, or 35c at $11.85.
Being based in Perth and servicing the resources sector, Monadelphous is regarded as being ‘collateral damage’ in the sell-off in resource stocks like BHP Billiton, Rio Tinto and Woodside.
Monadelphous said it had received a "notice of award" from Worsley Alumina for structural, mechanical, piping, electrical and instrumentation works as part of its efficiency and growth expansion project (E&G Project) in WA.
The $2.5 billion Worsley Alumina E&G Project aims to increase alumina refinery capacity from 3.5 to 4.6 million tonnes per annum at its site south of Perth.
Monadelphous managing director Rob Velletri said in the statement yesterday that the proposed works follow a long history of works associated with Worsley Alumina.
Monadelphous said pre-construction works have been approved and will commence immediately.
The company says it expects the contracted works to be completed by the third quarter of calendar 2010.
And, still in the sector, Auckland-based Fletcher Building yesterday revealed a conditional agreement to buy Fielders Australia Pty Ltd, an Adelaide-based steel products company.
Fielders is owned by Hills Industries Ltd (60%) and 40% by FSR Investments Pty Ltd.
The conditions include due diligence, Australian regulatory approval, and the approval of Fletcher Building’s board of directors, FBU CEO, Jonathon Ling said in a statement to the ASX.
Adelaide-based steel product company Fielders has annual sales of about $A275 million and employs 890 people across Australia.
Mr Ling said Fielders was a well run business with a solid reputation for performance and would complement the company’s existing business units in Australia and New Zealand.
The purchase price wasn’t give but Hills chairman, Jennifer Hill-Ling said in a statement to the ASX that the company expected this "transaction to return approximately $105M in cash to the Hills Group, comprising repayment of inter company loans, consideration for shares and a fully franked dividend".
Fletcher shares fell 14c to $5.55, and then reversed in the rebound to close up 6c at $5.75. Hills shares were higher all day and finished up 21c or 5% at $4.37.
