NRW Holdings chairman Ian Burston has told shareholders the contractor will not be "jerked around by anybody" after revealing it is in a dispute over its largest project at Roy Hill.
NRW Holdings chairman Ian Burston has told shareholders the contractor will not be "jerked around by anybody" after revealing it is in a dispute over its largest project at Roy Hill.
The comments made at NRW’s annual general meeting in Perth today follow an announcement it expected to make $1 billion in full-year revenue, at the low end of guidance between $1billion- $1.2 billion.
Following the guidance update, which also predicted a $50 million impairment in its Action Equipment Services subsidiary, NRW shares fell almost 20 per cent, and were trading at 46.7 cents at 12.46 WST today.
Mr Burston said the company, which had experienced a challenging year so far, was prepared for “fairly rigorous discussions” with Samsung C&T over how much it should be paid for what is its largest current contract.
“What I’m alluding to is I don’t want anybody to think that because times are tough we’re weak because we’re not going to be,” he said.
Managing director Julian Pemberton said negotiations with Samsung were over the greater than expected amount of earthworks involved in Roy Hill’s rail project.
He said the dispute was likely to impact on its earnings for the current financial year.
“The quantities have increased and what happens when the quantities increase (is we are) generally entitled to an increase (in pay) because there’s just more work being done,” Mr Pemberton said.
He said NRW was proud of the work achieved so far to construct 290 kilometres of the 330km of rail formation, at what he thought was an unrivalled pace of about 1km per day.
“We will work diligently to ensure we generate the appropriate value from the excellent work we have performed on the Roy Hill rail project.”
In a statement Samsung said it was continuing to negotiate with NRW and more information would be made available later.
Mr Pemberton said NRW’s second contract with Samsung on Roy Hill for concrete works was progressing without issues and both projects would be finished within months.
The decrease in work is expected to lead to a drop in employees.
By Christmas NRW will have 42 per cent fewer employees than it did six months ago.
It will employ 1,800 people, down from a peak of 3,092 in June.
Mr Pemberton said the company was pursuing a strategy of diversification and greater focus on the east coast.
He said it was tendering for more government infrastructure projects and had identified greater opportunities outside of Western Australia.
“We’ve been in Queensland since 2011 and we have the capability there so I think some of the opportunities will be more on the east coast,” Mr Pemberton said.
After announcing in June it had tendered for $2.8 billion worth of contracts, Mr Pemberton said NRW was now in the running to win up to $3.4 billion worth of work.
Of that $1.8 billion is for civil work, $1.1 billion is for mining projects and NRW has also identified several government infrastructure contracts, including with Main Roads WA, that it says could come through by the 2016 financial year.
“Our bid team has probably never been busier, we’ve just got to translate that into contract wins ... at the right price,” Mr Pemberton said.
He said NRW, which has contracts with BHP Billiton, Rio Tinto and Fortescue Metals Group, was still tendering for work in WA, including a contract with FMG to get new work at its North Star magnetite mine near Marble Bar.
The expected $50 million impairment in NRW's construction and mining equipment subsidiary AES comes amid belt tightening among many WA mining equipment hire companies.