Coronavirus hits Monadelphous activity

Engineering company Monadelphous has warned its business faces significant challenges due to the coronavirus crisis.

Monadephous expects margins in the second half of the financial year to be significantly challenged.

Engineering company Monadelphous has warned its business faces significant challenges due to the coronavirus crisis, saying construction projects had been delayed and its maintenance business had seen a “material reduction” in activity levels.

Monadelphous said on Friday its engineering and construction arm had experienced “supply chain issues causing ­delays on large resources construction projects currently in progress, as well as a number of temporary deferrals to potential new construction contract award dates”.

Its maintenance division, which delivered 68 per cent of its $852m in revenue in the first half of the year, had been badly hit by the deferral of discretionary maintenance work by resources majors, and by movement restrictions making it more difficult to get workers to remote sites, the company said. Its shares fell on the news, closing down 14.6 per cent at $9.65.

Monadelphous did not name the projects facing delays due to its supply chain problems, but the company has won major work on BHP’s South Flank mine, Rio Tinto’s Oyu Tolgoi expansion in Mongolia, as well as new construction at Rio’s West Angelas mines in the Pilbara, and Albemarle’s lithium hydroxide plant in WA’s southwest.

The company said it could not predict the total impact of the virus crisis on its full-year ­financial results, but “should the activity levels that the company is currently experiencing continue to the end of the financial year, revenue would be similar to that of the previous corresponding period”.

“Margins in the second half of the financial year are expected to be significantly challenged as a result of the extent of the disruption and the impact it has had on the company’s operations,” Monadelphous said.

Monadelphous booked earnings before interest, tax, depreciation and amortisation of $59.1m in the first half of the ­financial year, and a net profit of $28.5m. It finished the period with $163.3m in cash.

Monadelphous will also take a $14m writedown on the value of its water infrastructure business after an escalation in contract disputes and “disappointing levels of profitability”.