REPORTING SEASON: Downer Edi Limited (DOW)

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Figure 1: Downer Edi Limited 12 month chart

 

Downer EDI Limited (DOW) – Headwinds from the resource sector continue

– Downer EDI provides engineering, construction and maintenance services. The group relies heavily on the domestic resource sector to generate revenue. The mining facing business provides a range of services through each stage of the mining lifecycle. EBIT for the division fell by 20% to $1.59 billion reflecting factors such as the continued decline in commodity prices, the early termination and completion of contracts and the reduced volumes on existing contracts.

– Another leading contributor to revenue is the Engineering, Construction and Maintenance (EC&M) unit. The unit provides design, engineering and construction services to a range of industries including oil and gas, commercial infrastructure, power generation and mining. Full year EBIT fell by 28% to $51.5 million due to a downturn in the resource sector and the impact on DOW’s consultancy businesses and the underperformance of projects in Western Australia.

– DOW’s rail division builds freight and passenger trains in addition to providing operations and maintenance services. EBIT for this division rose by 4.8% to 27.5 million, although revenue fell 13% to $873 million. The lower revenues were due to the completion of passenger manufacture contracts and the increased EBIT was driven by productivity improvements and lower restructuring costs.

– Providing guidance for the 2016 financial year has proven difficult for DOW with the group saying it is hard to predict the flow of uncontracted revenue, which is slightly higher than it was this time last year. For the 2016 financial year, Downer is targeting NPAT of around $190 million.

– Downer declared a fully franked final dividend of 12.0 cents per share, payable on 17 September 2015 to shareholders on the register at 20 August 2015.

 

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Tom Piotrowski, Market Analyst,