-- Full-year profit now seen at between A$20 million and A$40
million
-- Company cites increasing uncertainty for new construction
work
-- CEO Nick Bowen resigns, effective immediately
-- Chief Operating Officer Ross Carroll to take over as CEO
(Recasts the first three paragraphs, adds comments from the
chairman and CEO-designate from the fifth paragraph.)
By Robb M. Stewart
MELBOURNE--The long-serving chief executive of Macmahon Holdings
Ltd. (MAH.AU) has resigned just as the Australian construction and
contract mining company warned its earnings could fall by more than
half this fiscal year as projects to mine coal and iron ore dry
up.
Macmahon said Wednesday it is bracing for less construction work
in the mining sector than it had anticipated even a month ago, when
it had forecast earnings would rise by about 20% this fiscal year.
It forecast its profit would now likely be as much as 64%
lower.
The revised guidance is further evidence of the pressures facing
Australia's resources industry, which is struggling with a sharp
decline in prices for industrial commodities and rising costs as
China's booming economy cools. Small mining companies are
struggling to secure financing for new developments, while larger
companies such as BHP Billiton Ltd. (BHP) and Rio Tinto PLC (RIO)
are retrenching and closing some harder-hit mines.
Macmahon in a statement to the stock exchange said Nick Bowen
had resigned as chief executive and managing director with
immediate effect and would be succeeded by the chief operating
officer of the company's mining division, Ross Carroll.
No reason for the change was given, but Chairman Ken
Scott-Mackenzie in a telephone interview said Mr. Bowen was leaving
on good terms and remained highly regarded by the company and the
wider industry.
Mr. Scott-Mackenzie said Mr. Bowen's successful track record
since he had taken over in 2000, transforming a "broken" and
regional company, was being overshadowed by the profit warning.
Macmahon's shares fell by as much as 47% when trading resumed
Wednesday after being halted since before the market opened Monday.
At 0412 GMT, the shares were 38% lower at A$0.3774.
The company said it now anticipates a profit of between 20
million Australian dollars (US$20.9 million) and A$40 million after
tax this fiscal year. The company swung to a A$56.1 million net
profit in the year through June from a loss of A$2.7 million a year
earlier, and last month said it was targeting 20% earnings growth
this fiscal year owing largely to additional work it had
secured.
The company said costs at a rail project for Rio Tinto had risen
sharply and it also had lowered its internal estimate of the volume
of new construction work it expects to secure and perform this
financial year. However, it said the outlook for its mining
business, which had been under the direct control of Mr. Carroll,
remained solid.
Mr. Carroll said in an interview that iron ore in Western
Australia state and coal to the east were the company's two biggest
markets for construction, but it has seen a number of companies
scale back expansion plans and cut jobs as prices have dropped this
year. In particular, spot market prices for iron ore have fallen
sharply in the past couple months which caught companies off guard,
he said.
BHP, Rio Tinto, Xstrata PLC (XTA.LN) and others have been
cutting hundreds of jobs at coal mining operations in Australia and
closing older or loss-making mines. BHP also has postponed the
expansion of its iron ore port facilities in the remote Pilbara
region, and rival Fortescue Metals Group Ltd. (FMG.AU) has reined
in spending and is cutting workers and operating costs.
"As work dries up, we have to constantly review our overhead,"
Mr. Carroll said, adding the company didn't anticipate having to
lay off large numbers of workers.
He added he remained confident regarding the company's contract
mining operations, which are the only mining operators at a number
of big mine sites and so can't be used by mining companies as
"swing capacity" that can be easily reduced.
Mr. Scott-Mackenzie said the company remained on track to
complete rail work for Rio Tinto's Hope Downs 4 iron ore mine in
Western Australia, which is scheduled to begin production in 2013,
but a management review in recent weeks had uncovered a number of
troubles and a significant cost blowout. He said additional workers
and equipment had been directed to the project to keep to the
schedule for laying track.
Macmahon began the A$99 million Hope Downs project for Rio Tinto
in 2011, building a 53-kilometer rail line and two bridges. Mr.
Scott-Mackenzie said costs for the project were now running at
about A$500,000 a day.
Write to Robb M. Stewart at robb.stewart@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires