23/05/2014 - 14:06

Grim outlook worsens for Lycopodium

23/05/2014 - 14:06

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Engineering contractor Lycopodium has slashed its full-year net profit forecast and announced a raft of redundancies as it battles to combat strong headwinds in the mining services sector.

Lycopodium chairman Mick Caratti.

Engineering contractor Lycopodium has slashed its full-year net profit forecast and announced a raft of redundancies as it battles to combat strong headwinds in the mining services sector.

Lycopodium expects to post a net profit after tax for the 2014 financial year of $4 million, down from its previous forecast of $9.5 million.

The company's first-half net profit fell more than 51 per cent to $6.3 million, and it expects to post a second-half loss of $2.3 million.

Lycopodium has previously flagged tough conditions but the company said today that the reduction in demand for its services had been more rapid and more pronounced than previously anticipated.

Its profit was driven lower by $3.6 million in redundancy costs for an unspecified number of workers "to better align the available workload".

Lycopodium said it had faced a reduction in opportunities in the mining sector, which translated into lower margins and a slow-down in conversion of tenders to new work.

Major mining companies have implemented ongoing austerity measures while junior miners continue to struggle to raise equity for new projects, the company said.

The company said it would continue to adjust its business to remain competitive amid expectations of subdued conditions over the next 12 to 18 months.

Its balance sheet remained in a strong position and its debt remained low, the company said.

Lycopodium shares dived almost 15 per cent to close the day's trade at $2.48.

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