Monadelphous says challenging times ahead

Engineering group Monadelphous expects market conditions to remain challenging as struggling resources firms continue to put pressure on the company's margins.

The Perth-based company anticipates 2015/16 full year sales revenue will be around 25 per cent lower than 2014/15 as a significant reduction in overall construction demand affects the company in the short term.

Monadelphous recorded a 37 per cent fall in first half profit to $37.65 million compared to $60.65 million in the previous corresponding period as it continues to cut costs and protect margins.

Managing director Rob Velletri said opportunities to secure new contacts were at low levels as resources projects were delayed in a weak price environment.

"Against the backdrop of reducing activity levels and an increasingly competitive environment, the company continued to reduce costs and drive productivity improvements to protect margins," Mr Velletri said.

Customers would continue to minimise capital and operating costs and focus on improving production efficiency, the company said.

"Australian market conditions are very competitive and expected to remain challenging on the back of historically low resource and energy prices," Monadelphous said.

Still, the outlook for maintenance and industrial services was more positive as facilities transition from construction to operating phase.

The company's cost reduction program and productivity initiatives largely offset the downward pressure on margins.

Monadelphous has been awarded around $900 million of new and extended maintenance contracts over the past six months.

Revenue dropped 30 per cent to $739.1 million and the company declared a half year dividend of 28 cents per share.

Shares added 20 cents, or 3.5 per cent, to $5.86.

MONADELPHOUS PROFIT DROPS IN TOUGH CONDITIONS

* Net profit down to $37.65m, from $60.65m.

* Sales revenue down to $737m, from $1.05b.

* Interim dividend of 28 cents a share, down from 46 cents.