Professional engineering and consulting firm Cardno Limited (ASX: CDD) shares have been slammed today after the company delivered a bleak profit forecast. The shares plunged as much as 25.8% to $3.57 early in the session before recovering marginally to trade at $3.74.
Following today's nosedive, the stock has dropped a massive 43% since the beginning of September, which compares to a 6% decline from the benchmark S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO).
Citing difficult conditions in Australia as a result of a reduction in capital investment in mining, oil and gas, Cardno announced that it expects its half-year profit to come in well below last year's $43.1 million result. In fact, it said it expected to report operating net profit after tax (NPAT) of between $27 million and $31 million for the half-year ending 31 December 2014.
The company said: "Cardno's construction materials testing and electrical engineering businesses in this sector are forecast to deliver $12 million less in EBIT (in this half)… reflecting both reduced revenue and lower margins."
Also impacting the company's performance has been the slower-than-anticipated start on new project wins and higher costs associated with business integration in the Americas. On a more positive note however, the company has recognised a pick-up in demand for infrastructure and urban development related engineering services in Australia, with a backlog now sitting at a record $939 million. This should result in an improved performance in the second half.
While Cardno has maintained a dividend of 36 cents per share over the last three years, today's profit warning may impact its ability to continue that trend.
