Australia's Macmahon Warns Profit to Drop, Shares Plunge
Australian construction firm Macmahon Holdings warned its profit would fall as much as 64 percent this year and its chief executive quit on Wednesday, knocking its shares to their lowest in more than three years.
The company said it expects to break even or report a small loss in the first half, slammed by rising costs on a rail project it is due to complete for Rio Tinto and by mining cutbacks, just a month after reporting a record profit.
Macmahon, which is also a mining contractor, said it now expects its full-year profit after tax will be between A$20 million and A$40 million, down from its forecast last month that profit would grow by 20 percent to around A$67 million.
It blamed "increased uncertainty about the outlook for new construction work given recent market volatility" and a sharp increase in costs to complete work it is doing on Rio Tinto's Hope Downs iron ore rail project in Western Australia.
"This is extremely disappointing, especially in light of similar problems in recent years," Macmahon Chairman Ken Scott-Mackenzie said, referring to problems on the Hope Downs project.
Macmahon's shares, 19 percent owned by rival Leighton Holdings, slid 45 percent to A$0.29, their lowest since April 2009, after coming off a two-day trading halt.
Bowen is being replaced by Ross Carroll, the company's former chief financial officer who has been promoted from the role of chief operating officer of the group's mining division.
Bowen said he chose to resign because he was ultimately responsible for the profit-forecast downgrade.
"The decision is mine and mine alone," he said in a statement, adding that he remained a top 10 shareholder of the company, which he led for more than 12 years.
Shares in mining and drilling services firms have been hammered over the past month on worries about miners cutting back production and projects due to soaring costs, weaker demand from China and a strong Australian dollar.