We had another corporate victim of the floods and wet weather yesterday.
Shares in Queensland-based builder Watpac slumped sharply after it revealed the wet weather had slashed profits.
The company joins a growing list of building, property, retailing (see separate story on Retail Food Group) and miners, especially coal transport and financial services groups that have been hit by the wet and flooding.
The company’s shares staged a small recovery in afternoon trading after they fell 18%, or 33.5c, in morning trading in the wake of the sharp profit downgrade.
Watpac told the ASX in a statement that first-half profit is likely to be significantly lower than in the previous first half due to wet weather on the east coast.
The company also signalled that its full-year profit may also be compromised by what it described as "unseasonal wet weather".
The shares tumbled 18% or 33.5c to $1.515. They then recovered to be off 19c or more than 10% at $1.66.
Watpac said that consolidated profit for the six months to December would be $3 – $5 million, down from $10.4 million reported in the first half of 2009-10.
Watpac said, "sustained unseasonal wet weather on the east coast" had constrained production volumes on mining and mining-related contracts in the Bowen Basin, in Queensland, pushed stand-down costs higher, delayed work on a large civil landscape project in Victoria, and pushed back timetables on a number of building projects.
Some profit from property sales also had been deferred to the second half of 2010-11.
"Whilst Watpac is in the process of negotiating extensions for time and cost with our clients on those projects which have been impacted by bad weather, the Board considers it prudent to revise downward the company’s earnings expectations until those negotiations are finalised," the company said.
"In the event that unseasonal wet weather continues for the majority of the first quarter of calendar year 2011, it is unclear whether the company’s full year results will exceed the previous corresponding period of $26.9 million."
But Watpac said the wet weather also had an upside with opportunities in rebuilding activity in the short term.
"We also anticipate that resource companies located in the Bowen Basin will need to accelerate their production schedules in the second quarter this year as a consequence of difficult mining conditions," Watpac said.
"Watpac is well positioned to capitalise on these opportunities and is currently in discussions with a number of existing and potential clients in respect of the role it can play in the significant clean-up and rebuilding exercise.
"Pleasingly, the group’s property development portfolio has been unaffected by flooding.
"However, the significant disruption that flooding has caused in Brisbane and surrounding areas will require us to revisit our expectations of property development timetables.
"The company is currently in the process of finalising its 31 December 2010 results which will subject to independent review by its auditors."
Watpac said it closed calendar 2010 with "an excellent work in hand position" after being advised as preferred on approximately $400 million of work in the four weeks leading up to Christmas.
Total work in hand (awarded and preferred) today stands at approximately $1.6 billion."
