Monadelphous to cut costs

Monadelphous Group says it will be looking to reduce costs to weather the current market conditions, with the company announcing a 23.6 per cent slide in net profit for the 2015 financial year, to $105.8 million.

The Perth-based engineering group posted a 19.9 per cent fall in revenue to $1.86 billion for the financial year, as a result of the deteriorating market and the continued focus by its customers on reducing their spending.

Monadelphous declared a final dividend of 46 cents per share, fully franked, taking the full-year dividend payout to 92 cents.

The company said it had signed $450 million worth of new contracts and extensions during the financial year, while a cost-reduction program over the last two years has saved it about $100 million per annum.

However, it said market conditions were expected to remain soft on the back of historically low commodity prices in the resources and energy markets.

“Customers will continue to focus on reducing operating costs, improving productivity and restraining capital expenditure,” Monadelphous said in a statement.

“Opportunities for new major construction contracts in the resources and energy sectors are likely to remain at reduced levels.”

That being said, Monadelphous was more positive on its outlook for its maintenance and industrial services division, particularly in the oil and gas sector.

“Activity is expected to ramp up over the next few years as a number of multi-billion dollar LNG projects move on to the operational phase,” it said.

“Margins will remain under pressure as competition is high for a smaller pipeline of work, with capital expenditure decisions delayed and operating expenditure tightened.

“The company will focus on additional initiatives aimed at reducing costs to protect margins and improve sustainability,” the company said.

Monadelphous was trading 1.1 per cent higher to $7.33 at 1:45pm.