Southern Cross Electrical Engineering has become the latest in a string of engineering contractors to revise its profit forecasts downwards for financial year 2011.
Southern Cross Electrical Engineering has become the latest in a string of engineering contractors to revise its profit forecasts downwards for financial year 2011.
Southern Cross announced today it expects its profit for the 2011 financial year to be significantly lower than its 2010 net profit after tax figure of $8.8 million.
In a statement to the Australian Securities Exchange, Southern Cross blamed the outlook on margin pressure on some projects that were secured when the contracting environment was very competitive following the Global Financial Crisis and a number of significant project delays.
"While this is a disappointing result in the short term, SCEE is confident of a solid turnaround in financial performance in FY2012, and anticipates NPAT will be above the $8.8 million recorded in FY2010," the statement said.
Southern Cross Electrical is currently in the final stages of tendering for a number of long-term contracts, which it is confident of securing in the next three months.
"If successful, FY2011 revenue is expected to exceed the $97.4m revenue recorded in FY2010," the statement said.
"This will result in a much stronger and predictable order book for FY2012 and FY2013 which will underpin revenue and profit growth."
Southern Cross Electrical managing director, Simon High said, "While all projects continue to deliver a profit, the increasingly competitive environment has put pressure on margins and impacted NPAT. We are confident that we will incease profitability from FY2012 onwards."
"With the number, quality and size of the projects in SXE's pipeline, margins are expected to improve over the next year. Given the strength of the pipeline, SXE will continue to retain the current capacity it is carrying in the business.
"There are tangible signs of a market upturn as witnessed by recent positive announcement from companies operating in the civil and mechanical segments, which are leading indicators.
"Tendering activity also continues to show signs of growth," he said.
Midway through last month, VDM Group became the fourth engineering contractor in less than a month to significantly downgrade its profit forecasts for the 2011 financial year.
VDM reported its forecast for a net operating profit slipped to $10 million, well below the $16.7 million net profit recorded for the previous financial year.
Earlier in November, Leighton downgraded its first quarter profit by $85 million, citing the strength of the Australian dollar, and project difficulties in the Pilbara and Queensland.
In late October, Clough announced its full year earnings would be down 20 to 25 per cent on 2009-10.
Macmahon also released a market update in October forecasting a "break even" result for the first half of the 2011 financial year.
The company pointed to poorer than expected performance on a rail contract in WA and failure by its construction business to win more work as reasons behind the disappointing performance.