UPDATE: Macmahon CEO Resigns as Company Warns on Earnings

-- CEO Nick Bowen resigns, effective immediately

-- Chief Operating Officer Ross Carroll to take over as CEO

-- Full-year profit now seen at between A$20 million and A$40 million

-- Company cites increasing uncertainty for new construction work

(Recasts the first paragraph, adds detail on the resignation and earnings guidance throughout)

 
   By Robb M. Stewart 
 

MELBOURNE--The chief executive of Macmahon Holdings Ltd. (MAH.AU) has resigned, as the Australian construction and contract mining company warned its earnings could fall as much as 64% this fiscal year amid increasing uncertainty over the outlook for new building work.

Macmahon said Wednesday that Nick Bowen had resigned as chief executive and managing director with immediate effect, and would be succeeded by Ross Carroll, chief operating officer of the company's mining division.

No reason for Mr. Bowen's departure was given in a statement to the Australian Securities Exchange. Chairman Ken Scott-Mackenzie said the board had accepted the resignation and thanked Mr. Bowen for his leadership during the past 12-and-a-half years.

Separately, Mr. Scott-Mackenzie said a jump in costs for rail work for Rio Tinto PLC's (RIO) Hope Downs 4 iron ore mine in Western Australia and uncertainties surrounding the commitment and timing of new projects would dent earnings for Macmahon's construction division this fiscal year.

The company said it now anticipates a profit of between 20 million Australian dollars (US$20.9 million) and A$40 million after tax this fiscal year. The company swung to a A$56.1 million net profit in the year through June from a loss of A$2.7 million in the corresponding period a year earlier, and last month said it was targeting 20% earnings growth this fiscal year owing largely to additional work it had secured.

The profit warning hit Macmahon's shares, sending them more than 47% lower in early trading. At 0148 GMT, the shares were down 37% at A$0.335.

Macmahon said a management review of the Hope Downs project had identified a number of issues with productivity and the order in which work had to be done to meet a revised completion program for Rio Tinto. This would result in significant additional costs to ensure the schedule for laying track is met and that the project is largely completed in the first half of this financial year, it said.

The company also has lowered its internal estimate of the volume of new construction work it expects to secure and perform this financial year. However, it said outlook for its mining business, which had been under the direct control of Mr. Carroll, remained solid.

"The company remains in a sound financial position and will be vigilant in monitoring changing market conditions," Mr. Carroll said. "I am confident the company can adapt to these changing conditions and deliver improved profits."

Mr. Carroll has been with Macmahon for almost six years, joining as chief financial officer before being promoted to chief operating officer for mining in early 2011.

Macmahon began the A$99 million Hope Downs project for Rio Tinto in 2011, building a 53-kilometer rail line and two bridges. Hope Downs 4 is a new open-cut iron ore mine with an annual capacity of 15 million metric tons, with first production set for 2013.

Write to Robb M. Stewart at [e-mail]

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