Southern Cross ups forecast on CITIC win

Southern Cross Electrical Engineering has forecast a 28 per cent increase in its full-year net profit after it was selected as CITIC Pacific's preferred contractor for the Cape Preston iron ore project.

In its interim report released today, the company reported a 5 per cent lift in its net profit to $7.2 million, after taking into account an unrealised foreign exchange loss of $1.7 million.

The operating profit before the loss was $8.4 million while revenue for the group increased 16 per cent from the prior corresponding period's $49.8 million to $57.7 million.

Earnings before interest, tax, depreciation and amortisation was up 11 per cent o $10.3 million.

The company said that as a result of the CITIC contract, the revenue forecast for fiscal 2009 is expected to increase from the prior corresponding period's $84 million to $94 million.

Full-year profit is anticipated to by $14.5 million, up from the previous year's $11.3 million, Southern Cross said.

The company added that contract negotiations are expected to be wrapped up in March with works to start shortly thereafter.

Cash at the end of the period was $24.4 million and the directors have declared a fully franked dividend of two cents per share.

The announcement is below:

Electrical and instrumentation installation company Southern Cross Electrical Engineering Limited (ASX:SXE) today announced an operating profit for the six months to 31 December 2008 of $8.4 million before unrealised foreign exchange losses. The reported net profit after tax result was $7.2 million. Revenue for the current half year of $57.7 million was an increase of 16% on the December 2007 result.

Financial Highlights

 Total revenue up 16% to $57.7m

 Earnings before interest, tax, depreciation and amortisation up 11% to $10.3m

 Net profit after tax ("NPAT") was $8.4m before unrealised foreign exchange losses on USD currency hedges taken out for Buzwagi

 NPAT was up 5% to $7.2m

 Cash flow generated from operating activities was $4.6m

 Closing cash balance was $24.4m

 Net cash was $23.7m

 Interim dividend of 2.0 cents per share fully franked consistent with prior year

Managing Director, Stephen Pearce said "These results prove the fundamentals of the business remain strong. The margins across the period are in line with our expectations given the mix of cost plus and lump sum projects and a full six months of costs associated with being a listed entity. We have $24.4m cash on the balance sheet which leaves the Company well placed to take advantage of growth opportunities."

One of the major projects undertaken in the half was the Cape Lambert port expansion project. This project commenced in February 2008 and SXE expects to begin demobilising from site from the fourth quarter FY09. This has been a very successful project for the Company having received the safety contractor of the month award on 3 occasions.

The other major projects the Company worked on in the six months were:

 Hope Downs 1 Stage 2 expansion;

 Cerro Corona gold mine in Peru; and

 Buzwagi gold mine in Tanzania.

Work at the Cerro Corona project is now complete and this project achieved zero LTI's after more than 670,000 manhours were completed. Mr Pearce said "this achievement was extremely pleasing given the work was performed at over 4,000 metres above sea level. SXE has the proud record of zero LTI's for the last 4.5 years."

As part of its growth strategy SXE is currently pursuing a number of tenders in the oil and gas sector. The notices of award for these tenders are not expected until the fourth quarter with work anticipated to commence during the first quarter of FY10. Revenue for FY09 will continue to be driven by contracted work for mining companies.

Mr Pearce said "demand for SXE's services from the mining companies appears to be holding up despite the winding back of capital investment by these companies."

SXE is pleased to announce it has been selected as preferred electrical contractor for some of the early phase works at the Cape Preston project. On the basis that contract negotiations are concluded in March and works commence shortly thereafter SXE anticipates full year revenue for the group will be in excess of $94m up from $84m in the prior year.

Mr Pearce said "with the current economic conditions it is very difficult to provide definitive full year guidance, however, based on revenues of $94m for the year and given the pending conclusion on a number of key contracts, the full year profit is anticipated to be $14.5m compared to $11.3m last year."