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Downer hits guidance despite profit drop

AAP logoAAP 3/08/2016 Prashant Mehra

Downer EDI's full year profit has dropped 14 per cent due to a slowdown in its main mining and construction divisions and write-offs related to an unsuccessful metro rail bid.

The engineering group met its guidance with a profit of $180.6 million for the year ended June 30, while revenue dipped slightly to $7.4 billion.

Downer shares jumped on the results, despite the company warning of continued pressure in its resources related businesses.

The shares were up 35 cents, or 8.2 per cent, at $4.50 at 1430 AEST.

The group's mining division has suffered a slowdown over the past 18 months, as contracts are completed and volumes drop amid falling commodity prices, forcing it to trim its full year profit guidance in February.

To offset the impact, Downer is building capability in other divisions, particularly in light rail design and construction and utilities services.

Downer has submitted bids for three rail contracts, including a $2.8 billion proposal to build NSW's intercity trains and a $2 billion metro train project in Melbourne.

It failed in another bid to build a new light rail system in Canberra, forcing it to write off $13 million in its 2015/16 accounts.

It is also believed to have partnered with China's State Grid Corp to bid for a controlling stake in NSW electricity distributor Ausgrid.

Chief executive Grant Fenn said nearly 55 per cent of group revenues are now generated from servicing public infrastructure customers in Australia and New Zealand, and he expects this percentage will rise.

"The company's diversity and strong market positions in key sectors will continue to provide reliable earnings, growth opportunities and high cash flow generation in 2017," he said.

Downer said it will target full year profit of $170 million in 2016/17.

MINING SLOWDOWN AND WRITEOFFS DENT DOWNER'S PROFIT

* Annual net profit down 14pct to $180.6m

*Revenue down 0.5pct to $7.39b

* Final dividend unchanged at 12 cents.

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