Australia’s Downer EDI sees $253 million annual loss on impairment charge, shares slip

By Navya Mittal

(Reuters) – Australian contractor Downer EDI said on Thursday it expected to record a statutory net loss after tax of about A$386 million ($252.52 million) for fiscal 2023 on impairments against its facilities and utilities units.

Shares of Downer EDI fell nearly 6% to A$4.17 in their biggest intraday loss since Feb. 27, after the company said it would recognise a non-cash, pre-tax impairment charge of A$549.6 million in the year ended June 30, 2023.

The impairment comes from increased debt costs and “tightening market conditions” for its cleaning and maintenance business Spotless, which caters to the defence sector.

“The impairment charge is definitely a shock to markets, especially ahead of results next week,” said Glenn Yin, head of research and analysis at AETOS Capital Group.

“The update also caused more concerns, given the company had already downgraded its guidance twice since December 2022.”

Downer EDI lowered its fiscal 2023 forecasts after lawsuits were filed alleging breaches of disclosures regarding a maintenance contract and the Sydney-based company revealed accounting irregularities in December.

“Downer is undergoing a period of significant and necessary organisational change. Against this backdrop, we have delivered underlying earnings in line with what was previously communicated,” CEO Peter Tompkins (NYSE:) said in a statement.

($1 = 1.5286 Australian dollars)