The wealth of major project activity in Western Australia has been a boon for local contracting firms, which are reaping the rewards of record high bidding activity in both the infrastructure and resources sectors.
The wealth of major project activity in Western Australia has been a boon for local contracting firms, which are reaping the rewards of record high bidding activity in both the infrastructure and resources sectors.
But while a number of contracting firms reported record profits last financial year, some are predicting that capacity constraints and the risk of project deferrals and delays could provide a significant challenge going forward.
Macmahon Holdings increased its full-year profit by 46 per cent to a record $48.8 million, with strong operational results across its construction and mining businesses delivering $1.2 billion in revenue.
While the company has been kept busy with its hostile takeover bid for Canning Vale-based Ausdrill in recent months, it has also managed to win a number of high-value contracts during that time.
These include a $78 million contract to extend Reid Highway, an $84 million contract for BHP Billiton Iron Ore's Rapid Growth Project 4 and a $65 million contract for earthworks and rail extension at Rio Tinto Iron Ore's Mesa A project.
The company's order book currently stands at $2.13 billion, with $805 million worth of new contracts and $572 million of contract extensions achieved in the past financial year.
In handing down its results, Macmahon chief executive Nick Bowen said while the demand for contracting remained strong, the availability and pricing of materials and equipment were key challenges for the company.
The integration of the Ausdrill business could go a way towards meeting those challenges, providing the company with full end-to-end mining services.
Monadelphous Group also posted a record net profit, up 9 per cent to $66.2 million, despite a 1 per cent drop in sales revenue to $954 million.
The company secured $900 million in new contracts and contract extensions in the past financial year, including a $290 million construction contract for BHP's Newman Hub project, the largest ever won by the company.
In what was a year of consolidation for Monadelphous, revenues were hit by the predicted ramping down of a number of major projects, together with timing effects and delays of new projects coming to the market due to capacity constraints.
In an effort to tackle these constraints, the company this year established a supply office in Beijing to source fabricated steel products for Australian project through its subsidiary, SinoStruct, and is also building offshore fabrication and assembly capability.
"The company continued to experience the impact of industry wide capacity constraints, with most projects experiencing delays due to critical shortages in professional engineering and skilled labour workforces," managing director Rob Velletri said.
"Sustaining growth in this capacity constrained environment will require a more innovative approach to project delivery."
Among the emerging players, Decmil Australia, a subsidiary of the Paladio Group of companies, received its largest contract last week with an $80 million civil works contract at Woodside's Pluto LNG project.
This follows other major contract wins by Decmil in recent months, including a $21.6 million contract for a new camp at BHP Billiton's Yandi mine, and a $38 million contract for the Finucane Island building complex.
The private family company was bought by Paladio in June 2007 and has since invested heavily in developing the systems and resources to allow it to undertake larger projects.
Decmil Australia managing director Scott Criddle said the company's strategy was to work with the major resources companies and grow through undertaking large-scale projects.
"We are targeting larger and larger projects to increase turnover; the only way to grow is to do larger projects," he said.
Mr Criddle added that some companies were bypassing the tender process and hand-selecting contractors based on past performance and reputation.
"Clients are being very selective of who they want to work with," he said. "Clients are picking the contractors they want to work with and are picking companies with the experience and expertise."
It was a year of mixed fortunes for the two newly listed companies, NRW Holdings Ltd and Brierty Ltd.
NRW Holdings Ltd, which listed in September 2007, posted a 106 per cent increase in net profit after tax of $41.4 million, with revenues up 70 per cent on FY2007 to $471.2 million.
Brierty Ltd, which listed in December 2007, experienced a difficult year, with two profit downgrades leading the company to post a net profit after tax of $3.76 million.
The result cost founder Alan Brierty his position as managing director, though he still remains on the board as executive director.
The company is looking to reverse its fortunes for this financial year after last week signing a letter of intent with Fortescue Metals Group for further major earthworks at its port development at Port Hedland in the Pilbara, valued at $40 million.
That was in addition to another contract with FMG, signed in July, valued at $33 million.
Brierty chairman Dalton Gooding said this latest contract win lifted the company's contracted revenue for the 2009 financial year to $190 million.
VDM Group Ltd reported a net profit after tax of $25.5 million, up 145 per cent, with revenues of $411 million, up 78 per cent.
The company bought four businesses during the year - Como Engineers, Malavoca, Rocktec Consulting, and Bellero Construction.
One of the state's largest contracting firms by revenue, BGC Contracting, is currently working on 12 civil and mining projects in WA, including the Koolyanobbing project for Portman Mining Ltd and Woodside's Pluto LNG project.
More recently, the company was awarded a $100 million, five-year mining contract with Windimurra Vanadium.
The private company has an estimated annual turnover of more than $700 million and employs about 1,400 staff.
