June 28 (Bloomberg) -- Watpac Ltd., an Australian construction company, is seeking to capitalize on the nation’s resources boom by boosting its mining division to about half of its total revenue from around 30 percent now.
The Brisbane-based company plans property sales of as much as A$150 million ($152 million) in the next 12 months as it disposes of land slated for long-term development, acting Chief Executive Officer Martin Monro said yesterday. The group is reinvesting the proceeds into the purchase of new equipment needed to expand its mining unit, he said.
“There were some property assets that for us to realize full value out of them would have taken a long, long time,” Monro said in an interview in Sydney. “We’re moving from what has traditionally been a capital-light business -- construction -- to the mining part of our business,” with heavy plant and equipment and labor needs, he said.
Watpac last month said the sales of development assets will result in a one-time charge of as much as A$90 million before tax. The group will see profit of about A$16 million in the year ending June 30, similar to last year, compared with earlier forecasts for a 20 percent increase, it said this month, partly as a result of unresolved claims related to its construction and mining projects.
Its shares gained 1.7 percent to 59 Australian cents as of the 4:10 p.m. close of trading in Sydney.
The company is selling primarily office, retail and industrial sites in southeast Queensland and Airlie Beach in the state’s north that it hasn’t received development approvals for, Monro said.
The timeframe in which the company achieves its mining target will depend on the return it’s able to extract from the sizable investments it must make in its mining operations, Monro said. It aims to focus the expansion of its mining division within the core areas it’s already in, including gold, copper, iron-ore and mineral sands, Monro said.
Watpac, builder on the first stage of Frasers Property Australia and Sekisui House Ltd.’s A$2 billion Central Park apartment project in Sydney, on Feb. 21 halted a share buyback it announced in December as it injects capital into its mining division, Monro said. The stock slumped 44 percent this year, compared with the S&P/ASX 200 Index, which fell 0.3 percent.
Watpac, which is providing mining and crushing services to at BC Iron Ltd.’s Nullagine Iron Ore project in Western Australia’s Pilbara region, is unlikely to shift its focus entirely to mining, Monro said. It’s still seeking opportunities to grow its property business, with the company likely to bid for a mixed-use project in Brisbane’s city center, he said.
“The strategy around going into mining is to remove ourselves from just being exposed to the construction sector in south-east Queensland,” Monro said. “Investment in mining will pay dividends for us this year and next, but construction is still the more profitable business now.”
The company won A$82 million of construction projects in Queensland, it said this month.
Monro, who stepped into his temporary role on May 28 when former managing director Greg Kempton said he was retiring, is being considered alongside external candidates for a permanent position at the head of the company, he said. Monro expects the company’s board to review the candidates in the next two months, he said.
To contact the reporter on this story: Nichola Saminather in Sydney at firstname.lastname@example.org
To contact the editor responsible for this story: Andreea Papuc at email@example.com