Gloomy and very unclear outlook will keep pressure on SP. It...

Gloomy and very unclear outlook will keep pressure on SP. It will need a big new contract for SP to recover.

off the ASX site this morning:

Posted on 6 August 2015 9:09 | By David Winning | DOW JONES INSTITUTIONAL NEWS
SYDNEY--Downer EDI Ltd. (DOW.AU) signaled Thursday it is struggling to arrest a slump in annual earnings, underscoring the pain felt by engineering contractors as investment in new mining and energy projects slows.
Downer said it is targeting net profit of around 190.0 million Australian dollars (US$139.7 million) in the year through June, 2016. That compares with earnings of A$210.2 million for the 2015 fiscal year--itself a 2.7% fall on a year earlier.
Contractors that rode a wave of investment amid a global commodities boom have been facing harder times as major mining companies like BHP Billiton Ltd. (BHP) and Rio Tinto PLC (RIO) cut spending on new projects and existing operations.
Earlier this week, Morgan Stanley said it doesn't believe the worst is over for Australian engineering and infrastructure companies, and predicted that many won't survive the downturn. It said a squeeze on their revenue will likely intensify over the next 12-18 months.
"After what essentially amounted to a decade-long bull market for contractors, we are less optimistic that such a significant cycle can rebase in just two to three years," said Nicholas Robison, an analyst at Morgan Stanley.
Downer said earnings before interest and tax from its mining division fell 23% to A$132.6 million in the last fiscal year, partly due to the early end of a contract with BHP and Mitsubishi Corp.'s (8058.TO) joint venture at the Goonyella Riverside coal mine in Queensland state.
However, the earnings impact was partly offset by the boost to its infrastructure unit from Tenix, which it acquired for A$300 million in October. Downer said earnings before interest and tax from infrastructure rose by 6.6% to A$203.7 million. Downer kept its final dividend steady at 12 cents a share.
"Providing guidance for the 2016 financial year has proven more difficult than in the past five years," the company said. "There is weakness and a high degree of uncertainty in a number of our end markets, particularly resources based construction and mining."
Downer said mining companies are continuing to keep costs under tight control, with spending on new resources projects likely to remain low. It didn't expect these trends to change in the current fiscal year.
-Write to David Winning at [email protected]
(END) Dow Jones Newswires
August 05, 2015 19:09 ET (23:09 GMT)
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