Demand drives Monadelphous to record profit

ENGINEERING group Monadelphous says a spate of new construction projects, driven by increased demand from resources projects, has helped it post a $A79.1 million profit for the six months to the end of 2012.
Demand drives Monadelphous to record profit Demand drives Monadelphous to record profit Demand drives Monadelphous to record profit Demand drives Monadelphous to record profit Demand drives Monadelphous to record profit


Lauren Barrett

The 37.5% increase in net profit after tax year on year was thanks to the company recording $1.3 billion in record sales revenue.

This marks a 46.6% rise in sales revenue over the previous corresponding period, generated from significant growth in all of the company’s divisions, in particular a huge surge in construction work.

The company had initially forecast a 40% increase in first-half sales revenue.

“The extraordinary revenue growth was driven by a wave of new construction projects, brought on by a surge in demand from major resources and energy projects currently in the development phase,” the company said.

Major work undertaken during the period included structural and mechanical work associated with the materials handling and processing facilities at the port operations for BHP Billiton’ Inner Harbour project, work for Rio Tinto at Cape Lambert, structural and mechanical work for Hancock Prospecting’s Hope Downs 4 iron ore project and a construction general services contract for Bechtel at the Wheatstone project.

New contracts were spread out across Western Australia and Queensland, and had a combined value of $300 million.

Earnings before interest tax depreciation and amortisation was a record $125.3 million, up 38.1% from the prior corresponding year.

During the first half of 2013, the company secured $860 million in new contracts and extensions, including major construction contracts in the iron ore and coal sectors as well as bagging two significant new liquefied natural gas services contracts.

Reflecting the record level of resources and energy developments underway, the company has been awarded a further $140 million in new contracts for the second half of 2013.

As a result, the company expects year-on-year revenue growth of about 35% for FY13.

“The pipeline of engineering construction opportunities following from the large volume of approved projects, particularly in the iron ore and LNG sectors, will continue to drive solid demand for the company’s services,” it said.

Throughout the period, Monadelphous experienced a large number of projects ramping up at the same time, helping its engineering construction division post sales revenue of $876.9 million.

The construction and maintenance services provider declared an interim fully franked dividend of 62c per share, compared to a 50c dividend for the first half of 2012.

Despite the solid result, shares in the company slid 6.1% to $26.16 in afternoon trade after providing a somewhat cautious outlook.

The company said 2013/2014 would be a year of consolidation in which the “achievement of any revenue growth will be challenging.”

“Whilst the opportunities for construction beyond this financial year remain solid based on the volume of approved projects, project delays and a slowdown in near-term new major project approvals are likely to reduce the pipeline of opportunities in the medium-term,” Monadelphous said.

With the rate of new project approvals in the resources sector becoming uncertain and customers working to reduce overall costs, the company said it would remain dedicated to managing risks and improving productivity.