Yesterday’s profit reports from the resources and linked sectors brought the good, the bad and the indifferent.
While shares in Macmahon Holdings fell almost 10% after it posted a disappointing first half loss, there was news that contractor and train builder Downer EDI will be looking for around a quarter of a billion dollars in new capital shortly.
Downer’s problems are all linked to the troubled Waratah suburban train contract for Sydney, and media reports yesterday suggested that the company will soon announce a raising of $250 million because of continuing losses on the contract. The company revealed a $250 million provision earlier this month, after a $190 million one last June.
Downer shares were up a 3c at $3.97 yesterday, 2c above the price the media said the rights issue would be priced at.
But the impact of the write-down at Macmahon was dramatic: the shares fell 7c to 50c, down almost 10% before rising to close at 54c, for a loss of 3c, or 5.3%.
That was the lowest the shares have been since last May.
Macmahon told the ASX in its December 2010 half yearly report that the $48.9 million dollar provision on its half interest in a rail contract in WA has dropped the result into the red to the tune of $13.2 million.
The rail joint venture is held with its major shareholder, Leighton, owning the other 50% stake.
That was down from a profit of $21.5 million in the December half of 2009.
Macmahon, which didn’t declare an interim dividend (1.5c paid for the same period in 2009-10), said the loss on its 50% interest in the RGP5 Rail North of BHP Billion in the Pilbara was due to the project being hit by delays and increased costs over the half.
Revenue for the six months also fell by 8% to $601 million, while earnings before one-off items were down 6% at $31.4 million.
Macmahon says there could be a positive boost to earnings in the second half, as the company is still negotiating "significant outstanding variations and an extension of time claim" on the Rail North project.
"In determining its financial position at 31 December 2010, the company has not booked any amount from the claims and variations," MacMahon said in the statement.
"As such, the December accounts reflect only agreed revenue, but have accounted for the full final forecast costs from the project. Consequently, any settlement amounts will positively impact future periods."
Macmahon says it expects a second half profit of $15 million, subject to the timing of new work, and after deducting $5 million for the impact of wet weather on operations.
That will still see a loss for the year, on current estimates.
"The significant wet weather and flooding in Queensland and more recently in northern Western Australia and the Northern Territory is impacting the group’s operations," Macmahon said.
"In particular, the Cameby Downs open cut coal mine in Queensland has been significantly impacted with the loss of the West Moreton railway line."
Operations at the mine are not expected to return to normal levels in April 2011, Macmahon said.
The company was optimistic about the coming year saying, "For 2011, the company currently has $1.25 billion of revenue secured".
The company’s order book is at $2.1 billion and Macmahon is preferred tenderer on $1.3 billion of new work which will be awarded shortly.
Queensland coal exporter, Macarthur Coal Limited has reported a 256% increase in first half profit, boosted by higher coal prices, which more than offset the fall in production and sales caused by the big wet in November and December across the coal fields.
The company yesterday told the ASX that net profit for the December 2010 six months was $141.25 million, up from $39.6 million in the prior corresponding period.
Coal sales revenue increased by $101.9 million, or 32%, to $420.4 million.
Sales fell 20% to just 1.15 million tonnes for the final quarter because of the big wet which forced the company to declare force majeure on its export deals.
Foe the December half, sales fell 12.7% to just over 2.4 million tonnes, but the big wet in Queensland, plus bad weather in other major coal exporting countries of Colombia, South Africa and Indonesia helped push spot coal prices higher in the December half.
That flowed through into higher second quarter prices for Macarthur’s coal, which is mostly PCI, or coal used as pulverised coal injection feed for steel blast furnaces.
That flowed through to current quarterly pricing for Macarthur.
And then the floods in January helped send coal prices even higher, and they are likely to remain at elevated levels until the third quarter with some mines in Queensland and other countries slow to get back into production.
The company said it tripled interim dividend to 24c, compared to 8c for the previous corresponding period.
Macarthur shares added 1c to $12.028 after hitting a day’s high of $12.26.
As to the rest of the financial year, the outlook is uncertain.
Last week the company’s CEO Nicole Hollows said in a statement to the ASX, “The company had been forced to cut 2011 financial year production forecasts because of the big wet in Queensland.
"The Company’s sal
