Downer EDI warned it faces “continued pressure” in its resources-related businesses after the contractor’s annual net profits fell 14% to $180.6 million, with a forecast of a fall to come this year.
Downer said it was targeting net profit after tax of around $170 million in 2016-17. The company said profits could increase if the company won one or more of its rail tenders it is bidding on.
Net profits were in line with Downer’s guidance but earnings before interest and taxation (EBIT), down 10.6% to $276.9 million, beat analysts’ consensus forecasts of $261.6 million.
The market liked the news and pushed up the shares by 7.7% yesterday to $4.48.
Downer said that falling EBIT in its rail, engineering and mining businesses was offset by higher earnings in the transport, utilities and technology businesses.
Downer EDI chief executive Grant Fenn said in a statement the company was “transitioning” its operations to provide more infrastructure services, with more than 55 per cent of group revenues now generated from Australian public infrastructure customers.
Downer will pay a fully franked final dividend of 12 cents per share, flat on a year earlier.That took the full year payout to 24 cents a share, steady on 2014-15’s figure.
Full-year revenue fell 0.5% to $7.4 billion.
Falling EBIT in Downer’s rail, engineering and mining businesses (which has been going on for the past couple of years) was offset by higher earnings in its transport, utilities and technology businesses.
Downer EDI chief executive Grant Fenn said the company was “transitioning" its operations to provide more infrastructure services, with more than 55% of group revenues now generated from Australian public infrastructure customers.
Mr Fenn said renewables would be "a sweet spot" for Downer, which has built half of Australia’s wind farms, and that the company was expecting "a substantial improvement" in its rail business in 2017.
Downer has submitted bids for three rail contracts, including a $2.8 billion tender to build and maintain NSW’s new intercity trains and Melbourne’s $2 billion High Capacity Metro Trains Project.
Downer has also partnered with China’s State Grid Corporation, which is bidding for a 50.4% stake in NSW electricity distribution group Ausgrid, which is expected to cost more than $10 billion.
Downer says it expects to know by the end of this month whether the bid, which is a rival to one from Hong Kong-listed Cheung Kong Infrastructure, had won.
