UGL’s share price sank by 17% to $7.94 yesterday on news it now expected an underlying net profit after tax for financial year 2013 of $90-100 million.
Sedgman’s shares dropped more than 10% to a low of 64c.
UGL managing director Richard Leupen said ongoing uncertainty and volatility in commodity markets had driven a continued slowdown of capital investment in the resources and infrastructure sectors, with further delays of major projects impacting revenues in the engineering business.
“Additionally, the cost management programs of the major miners have led to scope reductions and cancellations across UGL’s operations and maintenance business,” he said.
“Disappointingly, underperformance across several power projects has also adversely impacted our second half earnings outlook for the 2013 financial year.”
For engineering, a combination of UGL’s order book and targeted growth opportunities should see FY2014 revenue at a similar level to FY2013’s expected $2.3-2.5 billion, assuming no further project cancellations or deferrals, the company said.
Sedgman has warned investors that its earnings are likely to be below consensus forecasts.
“Market volatility and weak conditions in the Australian resources sector continue to provide a challenging trading environment,” Sedgman said in a statement.
“While recent conditional environmental approvals for key projects were positive signs, continuing delays in final environmental and investment approval has resulted in further project slippage with flow-on impacts on anticipated revenues in the second half of FY13.”
Other factors that could influence the final reported result for FY2013 include recent resourcing and overhead reviews which have resulted in redundancy costs being incurred and the uncertainty that exists around potential asset value write-downs from underutilised operations plant and equipment.
Unless current opportunities to re-deploy or dispose of such assets are converted by June 30, 2013, it is likely a write-down to the carrying value of the assets will be required.
