Monadelphous profit slides 27%

Shares in engineering firm Monadelphous Group fell sharply today after it posted a 27 per cent slide in profit on the back of lower activity in the resources and energy sectors and predicted contracting margins would remain under pressure.

Monadelphous generated a net profit of $67 million for the 2016 financial year, with revenue down 36.7 per cent on the previous year to $1.36 billion.

Earnings before interest, tax, depreciation and amortisation was 32.4 per cent lower at $113.6 million.

The company declared a final dividend of 32 cents per share, fully franked, for a total dividend payout of 60 cents per share.

Monadelphous managing director Rob Velletri said resources and energy market conditions had remained challenging throughout the year.

“While opportunities for new major resource and energy construction contracts are expected to remain at low levels, we are well placed to capitalise on growing maintenance opportunities, particularly in the oil and gas sector,” Mr Velletri said.

“The award of three long term oil and gas contracts, including a services contract associated with Shell’s Prelude floating liquefied natural gas project, demonstrates our capability to deliver a diverse range of operations and maintenance services for both onshore and offshore facilities.

“Our strong financial position and healthy balance sheet provides substantial capacity to pursue investment opportunities and advance our long term growth strategy.”

Looking forward, the company expects opportunities for new major construction contracts in Monadelphous’s core markets to remain depressed, however, the outlook for maintenance and industrial services is more positive.

Monadelphous is also working to establish an engineering, procurement and construction management business to expand its range of service offering to the resources sector.

Monadelphous shares were 17 per cent lower to $8.99 each at market close.