Forge smashes profit forecast

Shares in Perth-based engineering group Forge Group soared over 13 per cent today, after it smashed its full year earnings forecast to book a net profit of $15.6 million for the financial year, a 100 per cent increase on its 2008 result.

The final profit number was 71 per cent higher than Forge had forecast at the end of the December half, and 10.2 per cent higher than the $14 million profit it forecast in mid June.

The rise was built on a 32 per cent increase in revenues to $168.6 million and an 81.3 per cent rise in pre-tax earnings to $16.5 million.

The strong performance enabled Forge to declare its maiden dividend, with a fully franked final distribution of 3 cents per share payable on 25 September.

News of the result pushed Forge shares 10 cents higher to 85 cents in mid afternoon trading after earlier touching 94 cents.

All of the profits were attributable to Forge's construction businesses, Cimeco and Webb Construction (West Africa), which worked on a number of major projects in Australia and overseas. Major contracts included civil works at Alcoa's Worsley Alumina expansion, train load out facilities at Rio Tinto's Mesa A iron ore mine, compressor installation at NewGen's Neerabup power station, tank installation at the Boddington gold mine, the expansion of processing facilities at Gold Fields Tarkwa gold mine in Ghana, and construction of the Riverview aged care facility and the new Bunbury library.

Forge said its focus on providing "whole of life" engineering and construction services on a lump sum turnkey basis had served it particularly well in a year when the resources sector had been hard hit by the global downturn.

The company said it entered the current financial year with a remaining construction order book of $150 million, tenders submitted but still outstanding of over $200 million and a $150 million pipeline of tendersreceived but not yet submitted. In addition, Forge said it was tendering for engineering procurement and construction (EPC) contracts worth over $100 million.

It also highlighted its major breakthrough into the booming oil and gas construction sector during the year, with over $100 million in contracts for the Gorgon LNG project, the Dampier-Bunbury gas pipeline and Woodside's Pluto LNG project.

Forge said its strong financial position, including $17.5 million in cash reserves at the end of June and group debt of only $5.7 million, meant "further exponential growth can be accommodated and is in fact anticipated".