Ausenco banks on copper-led recovery

AUSENCO CEO Zimi Meka says the outlook for his business is positive despite the challenging trading conditions for the engineering services sector over the past 12 months.

Haydn Black

Meka said that while Ausenco’s revenues were likely to be lower for 2014 at $A355 million – with razor thin earnings before tax and other costs of just $1 million – he predicted that 2015 should see the engineering, procurement, construction and management company post a material improvement, with EBITDAX likely to be dramatically improved with the company pursuing a cost reduction strategy that aims to save $20 million.

To aid in its cost cutting the company has reorganised its management into three core areas: Asia-Pacific/Africa, North America and South America.

“Our strategic diversification continues to provide resilience and promote opportunities across our group,” Meka said.

“Our North and South American businesses remain profitable and our strategic presence in the Americas is providing a wide-range of opportunities for the group.

“Key future growth areas include the global copper market, in particular South America; North American infrastructure development, operations, maintenance and optimisation services across the resources and energy sectors.

“In recent weeks the major resource companies have issued statements about developing, extending or optimising their levels of copper production to meet an anticipated copper shortage in 2017.

“This has resulted in an unprecedented level of new and significant enquiries for copper development work to commence in 2015.

“We also have strong client interest in our asset optimisation services, where an increasing number of clients are looking for ways to improve asset productivity and reduce operating costs and in our contract operations and maintenance services across all sectors.”

But Meka also said Ausenco was suffering from the ramifications of West Africa’s ebola outbreak, and delays in client decision-making were adversely affecting the firm’s mid-year revenue predictions.

“With the recent weakening of the Australian dollar against key overseas currencies, we expect to see a related lift in the demand for Australian services into next year, as well as a positive earnings contribution from foreign earnings translated into Australian dollars,” he said.

“We continue to be intensely focused on managing our costs. We have a very efficient cost base globally which not only competitively positions our service offerings to clients, but also improves our business performance leverage to earnings growth.”

The firm will announce its full year results on February 18 next year.

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