Monday 19th Feb, 2018

Downer writes off $77m in mining goodwill

Photo: Shutterstock
Photo: Shutterstock

Downer has written off the remaining goodwill value of its mining unit, after losing two of its biggest contracts over the last 18 months.

The engineering and services firm said on February 5 it would record a one-time, $77 million charge in its FY18 first half results, which it will announce on February 21.

Downer lost a $500 million per annum deal with FMG’s Christmas Creek iron ore mine in 2016, and followed that up by losing a major contract for work at Idemitsu’s Boggabri coal mine late last year.

“Mining’s historic levels of returns have reduced significantly due to non-renewal of two material contracts and delays in securing alternative contracts,” Downer told the ASX on Monday.

“Downer remains positive in relation to Mining’s prospects, however the estimated future cash flows for the Mining business do not support the carrying value of the previously acquired goodwill.”

Given the charge is a not a material one, Downer assured investors the impairment would not impact the company’s cashflow or underlying guidance for FY18.

The company is targeting an underlying net profit after tax of $295 million in FY18.