Monadelphous focuses on maintenance

Engineering company Monadelphous Group has posted sharp falls in profit and revenue for the six months to December, but says there is a growing pipeline of work in its maintenance services division.

Monadelphous has reported a 37.9 per cent fall in net profit for the half year to $37.6 million, while sales revenue fell 29.9 per cent to $737 million.

It also declared an interim dividend of 28 cents per share, fully franked.

“The company’s cost reduction program and productivity initiatives largely offset the downward pressure on margins experienced in a highly competitive market,” Monadelphous said in a statement.

Despite the downturn in investment and construction projects, managing director Rob Velletri said the company had secured more than $900 million of new and extended maintenance contracts over the past six months.

“Maintenance prospects remain positive and the company is well positioned to capitalise on other opportunities currently in the tendering phase,” he said.

Monadelphous’s maintenance and industrial services division posted an 8 per cent increase in revenue to $323.3 million as a result of contract wins, including: for shutdown services at South32’s Worsley alumina refinery in Collie; maintenance services at Chevron’s Barrow Island assets and at BP’s Kwinana refinery; and a maintenance and modification services contract at Shell’s Prelude FLNG project in the Browse Basin.

The company’s engineering construction division, meanwhile, suffered a 43 per cent decline in revenue to $414.6 million, largely hit by lower demand for new construction work and delays on existing projects.

Monadelphous is also targeting work opportunities overseas in the shale gas industry, having teamed up with family-owned contracting business Mascaro in the US to establish a jointly-owned company, Monaro.

“Monadelphous has continued to broaden its services in core markets and progressed its strategy to extend its core services to overseas locations,” Mr Velletri said.

The company’s workforce stood at 4,464 at the end of December, down marginally on the 12 months prior but offset by increased work in maintenance services.

Looking ahead, Monadelphous said the outlook for maintenance and industrial services was more positive as activity in the sector begins to normalise and new process facilities transition from the construction to operating phase.

“We remain in a strong position to capitalise on a number of opportunities that are currently at the tendering stage,” the company said.

However, in the short term, the sharp fall in construction demand will continue to impact revenue, with the company expecting full-year revenue to be around 25 per cent lower than its FY15 result.

“In this volatile environment, we are committed to maintaining our strong balance sheet and pursuing investment opportunities that support our long term market growth strategy,” it said.

Monadelphous shares were 4.7 per cent higher to $5.93 each at 10:45am.