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Downer profit falls in NZ, takes charges on its business


Wednesday 24th August 2011

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Australian engineering and construction contractor Downer EDI is experiencing pressure on margins in a tough New Zealand market where it took a $A10 million ($NZ13 million) charge for the impact of the Christchurch earthquake.

The company said today that Downer New Zealand had earnings before interest and tax (Ebit) of $A14.3m in the year to June 30, down from $A61.1m in the previous year. Revenue of $A852.4m was little changed from $A887.6m the year before.

The Ebit margin, which is Ebit divided by total revenue, of 1.7 percent in the year was down from 6.9 percent the previous year. There was evidence of a squeeze on margins during the year as the Ebit margin in the second half was 1.2 percent compared to 2.1 percent in the first half.

The company has work in hand in New Zealand of $A2.6 billion and an "opportunity pipeline" of $NZ700 million. Of the opportunity pipeline $NZ400 million is possible work from the reconstruction of Christchurch. It is a participant in the Christchurch earthquake recovery alliance.

The company is restructuring its business in New Zealand to reduce costs.

It made a $A7.8m provision for its CPG New Zealand consulting arm. Earlier this month Downer said it wants to sell its CPG Asia, CPG Australia and CPG New Zealand units.

The company also made a $A9.5m loss on a state highway interchange project in South Auckland.

A spokesman said the project was a joint venture linking two highways in Manukau and cost overruns caused the loss. Claims to recover some of the losses went against it.

Overall, it reported a $A27.8m loss after making a $A250m provision for its Waratah train project in Australia.

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