Macmahon Holdings is poised to cut its earnings guidance, only a month after the mining services and construction group forecast 20 per cent profit growth for fiscal 2013.
The group requested a trading halt for its shares on Monday, saying it planned to release an update on its earnings guidance after a deterioration in the financial performance of its construction business.
Macmahon, which constructs roads, bridges, rail, marine and resource infrastructure, said in a brief statement that the outlook for new construction business was uncertain.
It expects the trading halt to lift before the start of trade on Wednesday.
The earnings update comes just a month after Macmahon forecast 20 per cent profit growth for 2012/13 amid strong orders and a robust mining tendering pipeline.
Bell Direct analyst Julia Lee said the expected downgrade was surprising considering it was only a matter of weeks since the company announced such a positive outlook.
“It caught the market unaware,” she said.
But she said much of Macmahon’s construction division was in mining infrastructure and therefore its earnings could have been affected by mining giants BHP Billiton, Fortescue and Rio Tinto’s recent decisions to reduce their capital expenditure on various projects.
“I guess it could be one of two things,” she said.
“First is construction related to mining infrastructure because of the reduction of capital expenditure from the big majors or it could be that the construction division is impacted by a particular project.”
In August, Macmahon said it expected its most immediate growth would be driven by mining-related construction projects in Western Australia and the Northern Territory, with work expected to peak in 2014.
The company, which is 20 per cent owned by Leighton Holdings, reported a 45 per cent rise in full year net profit to $56.1 million for the 12 months to June 30.
Ms Lee said other mining services companies that have reported similar downgrades in their earnings guidance have consequently had big falls in their share price.
Boart Longyear shares plummeted 37 per cent in just one day after it downgraded its earnings guidance from $US460 million ($A437.45 million) to between $US360 million ($A342.35 million) and $US390 million ($A370.88 million) in late August.
“We’ve seen some big drops in the mining services,” she said.
“I wouldn’t be surprised if we see a big reaction (to the Macmahon downgrade).”
Macmahon’s shares closed at 53 cents on Friday.
