Macmahon profit blow in $20m Alice-Darwin rail writeoff

Macmahon Holdings Ltd announced a net profit of $7.5 million after writing off a $19.9 million investment in the Alice Springs to Darwin railway.

Before the writeoff of $19.9 million through its 7 per cent investment in Asia Pacific Transport, Macmahon had recorded a 72 per cent net profit increase to $27.4 million for the 2005-06 financial year.

The $19.9 million writeoff represented a 7 per cent shareholding in the Asia Pacific Transport Company, a joint venture between Macmahon and a number of other companies, that held a 50-year build, own, operate and transfer concession for the line.

The rail line has made a loss for the past two years, after failing to become the major freight artery between Asia and Australian states that investors had predicted.

Despite the writeoff, company directors have announced a final, fully franked dividend of 1.5c per share, taking the full year dividend to 2c per share.

The news comes two weeks after fellow WA engineering company Downer EDI Ltd recorded a $25 million loss after a dispute with Iluka Resources Ltd over the contract variations in the company's Douglas mineral sands project.

In an announcement to the ASX, Macmahon chief executive Nick Bowen said the company anticipated strong profit growth in the 2007 financial year.

The company announced last week its acquisition of a specialised underground mining services business operating as Australian Raise Drilling and Combined Resource Engineering for $27 million, to be funded from existing bank facilities and cash reserves.

Macmahon shares were down 2.5c to 83c at 12:00 WST.