15/05/2013 - 15:40

UGL, Sedgeman cut earnings outlook

15/05/2013 - 15:40

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UGL and Sedgeman have joined the growing list of engineering and mining services companies forced to slash costs in response to a slowdown in project work.

UGL, Sedgeman cut earnings outlook
UGL chief executive Richard Leupan

UGL and Sedgeman have joined the growing list of engineering and mining services companies forced to slash costs in response to a slowdown in project work.

UGL will cut costs by $20 million after forecasting an underlying net profit after tax (NPAT) of between $90 million and $100 million.

It blamed tough conditions led by uncertainty and volatility in the commodity markets for the disappointing performance.

UGL said a number of major project delays had affected revenue due to “continued slowdown of capital investment in the resources and infrastructure sector”.

Underperformance across several projects had also adversely impacted on the company’s second-half earnings outlook.

UGL will integrate its underperforming operations and maintenance business into its existing engineering business as part of a $20 million reduction in costs.

Sedgeman has said it expects FY13 results to be below consensus forecasts.

The company said market volatility and weak conditions in the Australian resources sector were responsible for the revised outlook.

Sedgeman said that conditions “continue to provide a challenging trading environment”.

The announcements by UGL and Sedgeman come two days after engineering consulting group Coffey revised down its underlying earnings to $27 million-$28 million in response to delays and cancellations of mining and infrastructure projects.

As part of its restructure, Russell Waugh has been appointed chief executive of UGL’s engineering business.

UGL chief executive Richard Leupen said belt-tightening by the mining majors had wide ramifications.

“The cost management programs of the major miners have led to scope reductions and cancellations across UGL’s operations and maintenance business,” he said.

UGL, formerly United Group, was originally Perth-based United Engineering before expanding interstate and overseas.    

At the close, UGL’s share price was $7.94 down $1.63 or 17 per cent. 

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