Transfield Services shareholders are bracing themselves for a possible profit downgrade from the construction and maintenance company.
Transfield’s shares went into a trading halt on Tuesday as the company revealed it was carrying out financial reviews of its businesses.
It will make an announcement on its earnings guidance for the 2011/12 financial year once the reviews are complete, possibly on Thursday.
Analysts believe Transfield will slash its previous forecast of a full year net profit result at the lower end of the $130-135 million range.
They say Transfield’s recently acquired resource sector services provider Easternwell has not been performing as strongly as expected.
Morningstar senior equities analyst Ross Macmillan said he expected Transfield would have to again chop its full year earnings forecast for Easternwell, just weeks after cutting it to $87 million.
“I think we will probably see some sort of downgrades for that business and that will impact that company’s full year result,” he said.
“They’ve undertaken capital expenditure on drilling rigs and had project delays, which impacted their first half earnings.
“Either there have been some further delays or the wet weather in Queensland has impacted things and they will have to lower their profit guidance.”
Transfield bought Easternwell, which services blue chip clients including BHP Billiton, Chevron and Rio Tinto, in late 2010 in the hope it would be a strong contributor to earnings.
But in February Transfield lowered its 2011/12 earnings forecast for Easternwell to $87 million from $100 million.
“It surprises me that the business hasn’t been doing better as we have seen a lot of the company’s peers in the mining services sector doing extremely well and getting strong double-digit earnings,” Mr Macmillan said.
“There are a huge number of contracts in iron ore, coal and oil and gas in Australia and the next two to three years should be a sweet spot for these companies.
“What they have to do is ensure they win some of those contracts and their earnings will be strong.”
Transfield stunned investors in August 2011 when it posted a $19.7 million full year loss for 2010/11.
Its shares plunged to a two-year low of $2.30.
The loss was in stark contrast to the $73 million profit it posted the previous year.
Transfield’s shares last traded at $2.49.
