Monadelphous withdraws guidance

Engineering and construction contractor Monadelphous no longer expects its revenue to grow by 10 per cent this financial year, saying the economic slowdown and uncertain outlook meant it was unable to provide guidance.

It was only one month ago that the company said it expected revenue growth of around 10 per cent for the year to June 2020, to about $1.76 billion.

It noted at the time that the outlook was dependent on the extent and duration of project and supply chain delays resulting from the COVID-19 outbreak.

The company said today that measures taken by governments and customers to prevent further spread of the virus had precipitated a slowdown in economic activity.

“Due to the significant level of uncertainty relating to the extent and duration of this slowdown, the company is unable at this time to provide revenue guidance for the financial year ended 30 June 2020,” it stated.

The company's statement did not provide any details of project delays or supply chain delays affecting its business.

Monadelphous earns about two thirds of its revenue from operations and maintenance services for existing facilities.

It earns the rest of its revenue from engineering and construction services on new facilities.

Its major customers include the likes of Rio Tinto, BHP, Woodside and Albemarle Corporation, none of which have reported changes to their established project schedules.

Two resources companies that have announced reviews of their capital expenditure are Santos and Oil Search.

Santos boss Kevin Gallagher told Reuters on Tuesday the company would review all discretionary expenditure.

Similatly, Oil Search told the ASX on Wednesday it would defer all discretionary spending to preserve liquidity, in light of the sharply lower oil price.

The company said today it had established a dedicated team to monitor, assess and provide guidance to its business daily.

Managing director Rob Velletri said the company was taking decisive action to keep personnel safe, sustain business continuity and ensure it remained well positioned for when conditions stabilised.

“While the situation is evolving quickly there have been no confirmed cases of COVID-19 at Monadelphous to date,” he said.

“We have prepared and implemented detailed protocols within our business to inform the management of potential cases within our workforce, and how we will address and respond to cases within our business.

“We will continue to support our customers and the communities in which we operate during this challenging time.”

Monadelphous shares closed down $2.10 or 16.7 per cent at $10.50, the lowest close since November 2016.

They had been trading at nearly $20 in the middle of last year.

Some other engineering firms and contractors were also hit hard today. Worley closed 22.8 per cent lower at $5.55 while Perenti closed 21.9 per cent lower at 73 cents.

NRW Holdings was down 8.9 per cent while Macmahon Holdings was down only 2.3 per cent.