Global engineering and project-management group, MDM Engineering, has reported a $1.61m (£0.97m) drop in profits at $7.24m (£4.38m) as difficult market conditions continue to affect its order book.
The group increased its revenue to $22.44m (£13.59m) from $17.33m (£10.49m) a year earlier. Gross profit was $1.61m (£0.97m) lower at $7.24m (£4.38m), while profit before tax was down to $5.05m (£3.06m) from $6.81m (£4.12m) a year earlier.
According to the group the reduced profit margins reflect the lower levels of projects undertaken, with a number of existing ones postponed or cancelled as a result of difficult market conditions.
In addition, margins on some new projects have been restructured to reduce the group’s risk exposure. MDM added that higher site costs incurred on behalf of its clients had also weakened gross profit margins.
Bill Nairn, chairman, said: ‘The effect of the global credit crisis, depressed commodity prices and the resultant delays and suspensions of a number of mining projects in the latter part of 2008 had a direct impact on MDM’s first-half performance.
‘However, no downturn is permanent and while the global economy has not yet fully emerged from the crisis, there are signs of an improvement in the resources sector. This is evidenced by the strengthening in commodity prices experienced over the last few months, resulting in numerous expressions of interest received by MDM for project-related work and by the award to MDM of two execution projects and four studies in the period since the year end.’
The difficult trading conditions of 2008 in the mining sector have continued into 2009. However, despite the lower profit margins, the group said that it has a strong financial position with substantial cash reserves and is looking to expand its services globally.
In a statement, the group added: ‘MDM has weathered what we believe to be the worst part of the storm, as evidenced by the strong cash position that the group has successfully preserved. MDM is ideally placed to benefit from the recovery in commodity markets, particularly in the Southern African markets in which it specialises, as new execution projects are brought on line.’