Transfield shares down after writedown

Construction and maintenance firm Transfield has been hard hit by a downturn in the mining sector and will announce writedowns of as much as $285 million.

The announcement on Tuesday caused the company's share price to tumble more than nine per cent, before recovering slightly to be 10.5 cents, or five per cent, lower at $1.995 at 1405 AEDT.

Transfield said it expected impairment of intangible assets of between $270 million and $285 million.

The impairments relate mainly to the group's Easternwell Mineral's Exploration and Marine Geotechnical businesses as well as its US downstream maintenance unit.

"The writedowns are non cash, do not affect Transfield Services' gearing covenant under its banking agreements and have no impact on operations," the company said in a statement.

"The company will not need to raise equity as a consequence of these writedowns."

Lonsec private client adviser Michael Heffernan said the writedowns were not surprising considering Transfield's exposure to the resources sector.

"It's in the mining services area which has been adversely impacted by what's going on in the resources sector generally, with BHP and Rio (Tinto) cutting back capital expenditure," he said.

"I think they've been tarred with that brush, but when you see a writedown of this amount it makes you reflect on how the place has been managed."

Mr Heffernan said that by comparison to other companies that have written down or downgraded their forecasts, Transfield shares had not fared too badly.

"It's only gone four per cent," Mr Heffernan said.

"It's not as bad as some of the other stocks that have disappointed the market."

The company launched a business review in late last year and said it would be looking at ways of cutting costs and increasing productivity.

During its annual general meeting in November, Transfield warned shareholders that it expected softer market conditions for the rest of fiscal 2013 due to a slow down in the resources sector.

It also warned of falling discretionary spending in minerals exploration and development and delays in some infrastructure projects.

At the time, chief executive Graeme Hunt refused to provide any forecasts on Transfield's full year results because of market volatility.

However, the company had previously forecast an operating profit at the lower end of a range between $125 million and $135 million.

Transfield is due to report its first half result on February 26.

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