With two surprise announcements in as many days, troubled contractor Macmahon Holdings (MAH) has raised questions about its future stability.
On Monday the company flagged another big write-down, and then late on Tuesday it asked for its shares to be suspended from trading (they had closed at just 4.7 cents on Tuesday) so it could update the market about a contract.
It promised to provide that update to the ASX by Friday. The last time it provided an update on a contract it was to tell investors that troubled iron ore miner Fortescue (FMG) had broken a contract and given the work to a rival constrictor Downer EDI (DOW).
Now there’s speculation the company could be about to lose another big contract.
MAH 1Y – More trouble brewing at Macmahon?
In Monday’s update, Macmahon outlined a writedown of between $95 million and $125 million on its equipment and inventory values in its full-year report, amid loss of contracts and continuing tough conditions in the mining sector.
Macmahon’s December 31 first-half result had delivered a $112 million loss, including a $130 million impairment charge.
The lost Fortescue contract was worth $260 million at Fortescue Metals’ Christmas Creek mine in the Pilbara. As well the company had a payment dispute with a Mongolian government-owned coal miner.
Macmahon said in Monday’s announcement the write down would impact its full year earnings.
“The decision to make this impairment follows the cumulative effect of continued challenging market conditions for the mining services sector, and low demand and market prices for used mining equipment and inventory,” the company said.
Macmahon’s Australian projects include Newcrest’s Mining’s Cadia gold project in NSW, BHP Billiton’s Olympic Dam in South Australia, Xstrata Zinc in Queensland and others.
The company had cash of $124 million and gross debt of $161 million at the end of December 2014, according to its interim report.
At 4.7 cents a share, Macmahon’s market value is now below $60 million, compared to above $800 million three years ago.
