RCR profit guidance hit by downturn

20/04/2009 - 10:15

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Engineering firm RCR Tomlinson has forecast a full-year fiscal 2009 net profit of up to $13 million as profit expectations are hit by delayed or cancelled projects.

RCR profit guidance hit by downturn

Engineering firm RCR Tomlinson has forecast a full-year fiscal 2009 net profit of up to $13 million as profit expectations are hit by delayed or cancelled projects.

The company said it still expects to achieve its targeted 15 per cent revenue growth for the 2009 financial year, however has now forecast its net profit after tax to be between $11 million and $13 million.

RCR said it will be hit with a $1.3 million charge as a result of implementing initiatives arising from an operational review, undertaken in response to the current economic climate.

The profit guidance follows a first half profit of $7.6 million and a record net profit of $17.95 million for the 2008 financial year.

"RCR had expected that profit and margin would be weighted to the second half of the financial year due to the high level of new projects commenced during the first quarter of 2009," the company said.

"These profit expectations have been impacted by delayed or cancelled projects, restructuring costs around the reduction in RCR staff, general cost reduction initiatives and efficiency measures implemented across the Company."

Shares in RCR were down eight cents to 42 cents at 12:00 AEST.

 

 

The announcement is below:

 

 

OPERATIONAL AND FINANCIAL UPDATE

RCR Tomlinson Ltd (ASX: RCR) advises that while the target of 15% revenue growth for the 2009 financial year is still on track to be achieved, RCR now expects net profit after tax for the 2009 financial year to be in the range of $11 million to $13 million, following a first half profit of $7.6 million.

RCR had expected that profit and margin would be weighted to the second half of the financial year due to the high level of new projects commenced during the first quarter of 2009. These profit expectations have been impacted by delayed or cancelled projects, restructuring costs around the reduction in RCR staff, general cost reduction initiatives and efficiency measures implemented across the Company.

RCR Energy

RCR Energy comprises the Laser division, Heat Treatment, Boiler Service and Energy Projects servicing Australia and New Zealand. This Business Unit has seen a significant downturn in both the Laser Division and Energy Projects. The majority of projects for new boilers have been either suspended or have slowed leading to a reduction in the number of employees in this area. There have also been cost overruns on Energy related projects which has impacted the profit contribution from the Business Unit. Boiler servicing along with the heat treatment operations have not experienced the same downturn and demand to date has remained steady in these areas.

RCR Engineering

RCR Engineering encompasses our workshops across Australia. This Business Unit has experienced mixed conditions with Western Australia remaining firm on the back of existing projects while the East Coast operations have experienced a severe downturn due in particular to reduced expenditure in the quarry and pressure component industries. Employee numbers have been reduced in Brisbane and New South Wales within the workshops.

RCR Construction and Maintenance

RCR Construction and Maintenance provides specialist teams to service structural, mechanical and electrical construction projects and supervised shutdown maintenance and construction services. This Business Unit has seen a reduction in demand within the mining sector which has been partially offset by growth in the oil and gas construction sector.

RCR Positron

RCR Positron consists of RCR's electrical maintenance and construction operations. The Positron Business Unit has been impacted by delays in start ups to contracted project work. This has impacted the expected profit contribution to the 2009FY. The outlook for the remainder of calendar 2009 is more positive as delayed projects commence and since January this business unit has won an additional $30 million of project work.

Rationalisation Process

RCR has responded to the current economic environment by undertaking an operational review across each of its Business Units which has resulted in a reduction in the number of staff within certain divisions. These initiatives will result in annualised cost savings of more than $2 million and these benefits are expected to flow through from April 2009. However, implementing these initiatives will result in a charge of $1.3 million which will impact the company's full year results.

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