Watpac has revealed the financial impact of a dispute with BC Iron and declining work at Pluton Resources’ Cockatoo Island project, including $41.7 million worth of write-downs.
Watpac has revealed the financial impact of a dispute with BC Iron and declining work at Pluton Resources’ Cockatoo Island project, including $41.7 million worth of write-downs.
Late last year, Watpac launched legal action with BC Iron alleging contractual breaches related to BC Iron terminating its Nullagine joint venture project mid last year.
Citing reduced work volumes, together with declining underlying financial performance and general mining sector challenges, Watpac recorded a $10 million impairment in its civil and mining division.
It also recorded impairments against the carrying value of receivables of $12.5 million and plant and stock assets of $19.2 million that previously operated at the Nullagine project.
The Queensland-based company, which runs its Watpac Civil & Mining division out of Western Australia, said it had recorded an overall underlying net profit after tax of $6.7 million for the first half of the current financial year, slightly higher than a $6.2 million profit recorded in the first half of last financial year.
It recorded a mining and civil revenue of $79.3 million, down 44.8 per cent compared with $143.7 million revenue made in the first half of the 2014-15 financial year.
Watpac managing director Martin Monro said it was continuing to reposition its operations, with more than 85 per cent of its revenue now coming from construction.
He referred to large impairments made in the mining and civil part of the business as extremely disappointing, but necessary given the challenges impacting the resources sector.
“For some of our current and former mining clients, weaker commodity prices have gravely impacted their operations and this has presented difficulties that we have had to actively manage,” Mr Monro said.
He said the company would continue to align its investment levels in its mining and civil business to be commensurate with market conditions.
“We cannot do anything about the number of new work opportunities, but we are operating in an environment where contractor certainty must be paramount for mine owners and our strong financial position gives us a clear advantage over many of our competitors.”
Last year, Watpac said as part of BC Iron’s termination of the Nullagine iron ore project it had received a $2 million payment and BC Iron had been required to buy $6.4 million of its plant and equipment.
BC Iron has contended no further payments are due, but has since countered Watpac’s litigation with a counter claim. The matter is ongoing.
Watpac’s shares were down almost 3 per cent today, closing at 99 cents.
