Infrastructure and environmental services group Cardno Limited (ASX:CDD) has reported a $200m write down in its FY15 Guidance and Market Update on Wednesday. The company reported that it expects operating net profit after tax (NPAT) of between $48m and $51m for the year ending on 30 June 2015. It also reported NPAT of $16.5m to $19.5m for the second half, down significantly from projections. As a result of the underperformance, Cardno will take a non-cash impairment charge that is expected to be around $200m.
The company reported weakness in both Australian and US markets. Its US businesses suffered from harsh winter conditions in the North Eastern states, a slowdown in the demand for oil and gas services, slower than anticipated conversion of backlog into project starts and increased competition in testing services. It also failed to meet its first-half saving goals in its Denver, Colorado business. Cardno also reported revenue struggles due to the headwinds facing the Australian mining sector. In addition, recent volatility in the AUD/USD FX rate has put pressure on the company.
The non-cash impairment was attributed to the underperformance of its American Region businesses. The report on Wednesday said Cardno would reassess the carrying value of its investments in both its US and Ecuadorian operations. “The past twelve months have been very challenging with the difficult market conditions requiring significant action to improve overall business performance and outlook,” said Chief Executive Officer Graham Yerbury. “We are evaluating all components of our business in the American Region with a view to improving overall profitability and positioning the business for a return to organic growth.” Shares of CDD have fallen $1.02, or 29.65 per cent, at $2.42 per share near the end of trading on Wednesday. CDD has fallen 62.98 per cent in the last 12 months and 29.09 per cent so far this year.
Author: Imran Valibhoy
May 20, 2015
Since Joining the firm in 2006, Imran has worked on a range of M&A and Capital Market transactions in the natural resources, mining as well as projects in the renewable energy sector. Prior to joining Wise-owl, Imran worked at Euroz Securities in Perth, aiding in the advisory and valuation of companies in the mining and industrial sectors in Australia. Imran has a Masters in Banking & Finance from City University's Class Business School in London and a Bacheloor degree in Commerce from UWA.