Engineering firm Downer EDI is cautiously optimistic about achieving further growth after returning to full year profitability.
Downer said it expected to deliver a net profit of around $210 million in the 2012/13 financial year and earnings before interest and tax of around $370 million, due to the amount of work it had in hand.
Downer shares closed 35 cents, or 11.2 per cent higher, at $3.47 on Monday after reporting a net profit of $112.8 million for the year to June 30, a turnaround from $27.8 million loss in the previous corresponding period.
The result comes after the financially troubled Waratah train project, in which Downer is involved, received financial support from the NSW government.
Downer chief executive Grant Fenn said it appeared there was a growing level of uncertainty about investment levels and the timing of those investments in the infrastructure markets of Australia and New Zealand.
“There’s no doubt about that, so caution on the outlook is probably wise, but Downer is well positioned on our financial 2013 revenue,” Mr Fenn said.
“We have got a reasonable proportion of our revenue locked in.”
Mr Fenn said work in hand remained high, at about $20 billion.
“We are improving our win rates in the right areas,” he said.
The Waratah train project had passed some significant milestones during the year and, while it was still a challenging project, it now represented a substantially lower risk to the group.
The $3.6 billion taxpayer-funded rail project has been hit by cost blowouts and delays.
Earlier this year, the NSW government agreed to bail out the troubled project, in return for a 100 per cent equity stake.
Mr Fenn acknowledged that there were still a lot of trains to build, with 23 expected to be made available by Christmas 2012.
Manufacturing of additional trains was progressing at three trains per month.
All of Downer’s businesses posted higher revenues, with its mining business recording the strongest growth, at 68 per cent compared to the previous year.
And reports of a slowdown in investment in the mining industry had not translated into fewer tenders.
Downer is looking at more liquefied natural gas work and says also that the Christmas Creek iron ore operation in Western Australia, where it has a mining services contract with Fortescue Metals Group, is performing well.
Citigroup analyst Guy Robinson said Downer EDI had made gains but he questioned whether there were still major risks associated with the Waratah train schedule.
“There’s some very good progress on the Waratah trains,” Mr Robinson said.
