Shares of Macmahon Holdings Ltd. fell deep on Wednesday morning after the Australian construction and mining firm announced it is cutting into half its full year earnings estimate guidance for 2012-13 and that its chief executive, Nick Bowen, has resigned.
Citing market volatility and rising costs, Macmahon, 20 per cent controlled by Leighton Holdings, said it forecast its full-year profit after tax will hit between A$20 million and A$40 million, down from an August estimate that income would jump by 20 per cent to around A$67 million. The company earned a $56.1 million profit in the year to June 30, 2012.
After the earnings slash pronouncement, the company likewise declared the resignation of Mr Bowen, which takes effect immediately. He will be replaced by Ross Carroll, the chief operating officer of MacMahon's mining business.
Both notices created a ripple effect on investor confidence, as shares of the Australian construction and mining firm, which constructs roads, bridges, rail, marine and resource infrastructure, plummet to an eight year low on Wednesday morning. As of 1029 AEST, MacMahon shares dove 25 cents, or 47 per cent, at 28 cents.
"Despite today's extremely disappointing news, Macmahon is still a strong company," chairman Ken Scott-Mackenzie said in a statement.
"Following the management review of the Hope Downs 4 project, a number of additional issues have been identified with earthworks productivities and the order in which the work must now be performed to meet the revised program," he said.
"These issues mean that additional costs will be incurred to ensure the client's schedule for track laying is met and that the project is substantially completed in the first half of this year."
The Australian construction and mining firm expects second half earnings will return to more normal levels as majority of reduced earnings will occur in the first half of the financial year.
Macmahon shares last traded at 53 cents before being placed into a trading halt ahead of today's announcement.
Mr Bowen has been connected with Macmahon for 12 years. His successor, Mr Carroll, who had worked previously for Woodside and BHP Billiton, has been with Macmahon for six years, first joining the company as chief financial officer before getting promoted to chief operating officer of the mining business in 2011.
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