Article: Mining slump hits bottom line of Downer EDI's locomotive business

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From the ABC News --> Mining slump hits bottom line of Downer EDI's locomotive business

Mining slump hits bottom line of Downer EDI's locomotive business
Inside Business

Engineering and infrastructure company Downer EDI says a downturn in mining demand is significantly affecting its locomotive construction business.

Downer says its orders to build between 55 and 60 locomotives three years ago have "dropped off considerably" to no orders now.

Chief executive Grant Fenn has told the ABC's Inside Business program those "heady days" are in the past.

"There are no orders for locomotives at this point," he said.

He says Downer's rail division is going through significant change and is now focused on helping operators better manage their assets and costs.

"For the last 12 months we've been working with the mining companies, particularly around their cost base," he said.

"We've been working with them pretty pro-actively to reduce their costs but we've noticed this for the last 12 months, in the locomotive business, we provide locomotives for the mining industry, we've seen orders really drop off considerably and demand drop off," Mr Fenn said.

"So we've got a small lull in the market, I think, for a period until that gets soaked up. At this point certainly over the next 12 months we don't see much changing in that."

Meanwhile, he says Downer will not get its money back on the Waratah train project in New South Wales.

Waratah is the largest rolling stock project undertaken in Australia and includes the building and maintenance of 626 train cars for use on the Sydney rail network.

"We've certainly got the trains now, we're producing at a faster rate than trains have ever been produced in this country," Mr Fenn said.

"We expect to deliver the last train by mid next year. Our customer likes the trains, the travelling public likes the trains and we've got a three-year maintenance contract.

"So we're pretty happy where that is right now and we'll be a pretty core part of where New South Wales rail travel and certainly Sydney rail travel is for the next 30 years, and that's great."

But Downer has lost money on the project, and Mr Fenn admits "we're not going to get that back".