Monadelphous Group has continued to refine its business as it deals with tough conditions in its core Australian market, revealing today it has closed a US joint venture, opened a workshop in Houston, expanded its operations in Manila and acquired a fabrication business in Newcastle.
The engineering company said it had closed its Pittsburgh-based Monaro joint venture, which was established in 2015 to pursue growth opportunities in the Marcellus and Utica shale gas fields in the north-east of the US.
The closure was attributed to continuing unfavourable market conditions, and will come at a cost of less than $1 million.
Monadelphous said another factor in its decision was the momentum in its China-based fabrication business SinoStruct, which had won contracts for US clients.
SinoStruct has recently established a workshop and logistics facility in Houston, and grown to have about 200 permanent staff in Australia, China and the US.
Another strategic initiative during the year was further growth in its offshore service centres, including in Manila where about 100 people provide technical support for the business.
In addition, Monadelphous has continued to pursue small add-on acquisitions, buying Newcastle-based fabrication business RIG Installations last month.
Monadelphous said the acquisition was not material in size, but would add to its presence in NSW’s Hunter Valley region, where it had operated for 15 years.
RIG is the group’s fourth acquisition in recent years, and follows the purchase of Port Hedland coating provider Arc West in September last year for up to $7.7 million.
While the Monaro joint venture did not work out, Monadelphous is continuing to partner with other businesses.
Notable moves last year included formation of the 60 per cent-owned Mondium joint venture with Lycopodium and the 55 per cent-owned Zenviron joint venture with ZEM Energy, with the latter already winning work.
The overall picture facing Monadelphous in its core resources and energy markets in Australia was soft growth and intense competition putting pressure on margins.
As a result, the company reported a 14 per cent fall in net profit to $57.6 million in the year to June 30.
This was on the back of a 7.3 per cent fall in sales revenue to $1.26 billion.
It said a fall in activity in the engineering construction market was partially offset by increased maintenance activity.
The maintenance division achieved revenue growth of 7 per cent, while engineering construction revenue was down 18.8 per cent.
Monadelphous said prospects for maintenance services continued to be strong, with revenues from oil and gas services expected to grow as new offshore projects were commissioned and production started.
Monadelphous also said it had substantial capacity to invest in new business opportunities, particularly in the infrastructure sector.
Employee numbers grew strongly during the year to 6,164 at June 30, up from 4,438 one year earlier.
Contrary to the turnover trend, the largest growth was in the engineering construction workforce.
Th company said this was a result of the ramp up-in activity on a number of contracts secured towards the end of the financial year.
Monadelphous shares closed up 5.2 per cent today at $14.48.
This followed a slide from about $15.50 at the start of this month.
