Queensland-based Watpac Civil & Mining has slashed $30 million in costs from its company as it looks to concentrate on mining services, as well as defence, social infrastructure and commercial construction.
The company’s chief executive Martin Monro sees many possibilities in the mining industry even with the downturn.
“The reports of the mining sector stopping is just not correct,” he told The Australian.
Mining services generate $500 million a year in profits for Watpac.
The company won BC Iron's $35 million Nullagine iron project last year, which involved haulage of ore from the project's satellite mines to the ROM stockpile over four years.
The issue for mid-market builders was whether top level contractors would invade their territory and tender on smaller to mid-size ventures, Monro said.
He said the most challenging aspect for the construction industry was that work had dipped in the last four years, and it was still dropping. The consequence was insolvencies.
“It really started to bite in the last 18 months,” Monro said.
The company still has a string of defence projects in the offing despite defence budget and government contract reductions. It won a $146 million contract earlier this month to upgrade 16 army bases in Victoria, New South Wales, ACT and Queensland.
Watpac reduced its earnings outlook for the full year, stopped distributions for the year, and announced it would fold its eastern seaboard civil engineering ventures, which has been beset with problems.
The reduction comes just months after property Moghul Kevin Seymour sold his 15 per cent stake to Belgium’s Besix for $20 million.
Besix has a 17.5 per cent stake in Watpac after buying more shares on the market.
“In the 12 months I’ve been CEO, it’s been about cleaning up the balance sheet, which was inappropriate for a post-GFC world,” Monro said.
“We’re a business of about $1.5 billion (turnover). So a $30 million reduction in operating overheads is a big number.
“I’m not that popular. I’ve taken the coffee machines out of offices, but better to lose a coffee machine than a person.”
Monro said the company only had borrowings on plant and equipment related to mining projects, not any property debt. He said Watpac still had $100 million of sites to expand despite selling weak property holdings.
“I think we’ll be a much leaner and disciplined organisation. It’s a good place to start for what I think is the emergence of some signs of life and an improving economy.”