Shares in national contracting groups CIMIC and Downer have plummeted more than 20 per cent after the companies reported significant write-downs and higher costs respectively.
Shares in national contracting groups CIMIC Group and Downer have plummeted more than 20 per cent after the companies reported significant write-downs and higher costs respectively.
CIMIC Group announced it had completed a strategic review of its 45 per cent interest in BIC Contracting (BICC), based in the Middle East.
The company reported a one-off post-tax impact of around $1.8 billion in its 2019 financial statements, which also includes an expected cash outlet of around $700 million during 2020.
“CIMIC has committed facilities and cash available to meet all obligations as required,” the company said in ASX announcement.
“Consequently, CIMIC will not declare a final dividend for 2019.”
Shares in CIMIC had fallen by 20.13 per cent, as at 2:50pm AEDT, to trade at $27.94.
Following the evaluation, CIMIC plans to sell its BICC division and maintain a focus on its core markets in Australia, New Zealand and Asia Pacific.
Excluding the BICC impact, CIMIC said it expected a net profit in line with guidance of around $800 million for 2019.
It said financial results would be announced in February.
Meanwhile, Downer has cut its profit guidance for the 2020 financial year by $300 million, citing an underperformance in and lower revenue from its engineering, construction and maintenance (ECM) division.
Downer said as it progressed to complete a number of "loss-making" construction contracts within the ECM division, costs incurred during December and January had exceeded the company’s estimates by $43 million.
Downer chief executive Grant Fenn said the company was disappointed with the deterioration of the projects at such a late stage in their delivery.
“We do not expect any further increase in costs above our revised estimate,” he said.
Further, the company has reported a $300 million decrease in forecast revenue and a $20 million decrease in forecast earnings from its ECM division for the remainder of FY20.
Downer attributed the loss to delays in project awards in the resources-based construction market and to grid and connection issues in the renewables sector.
The company will reposition its ECM construction effort to more competitive markets and projects with long-term, serviced based contracts – a restructure that Downer said would cost an unbudgeted $10 million.
Shares in the company were down 21.43 per cent at 2:55pm to trade at $6.88, despite announcing a significant contract award from Brisbane-based Stanwell Corporation.
Under the five-year, $600 million contract, Downer will provide mining services at the Meandu coal mine in Queensland.
The contract is an extension of Downer’s current operations at the mine, which commenced in 2013 and was due to expire on June 30 this year.
Downer’s Queensland operations also include the Blackwater, Commodore and Goonyella mines.