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  • Downer EDI’s (DOW) CEO has given a presentation at the Macquarie Australia Conference, outlining COVID-19’s impact on the company
  • The pandemic has affected numerous Downer operations, including its mining, asset services, tram service, and Spotless business
  • However, COVID-19 has not affected demand for critical Downer services, including telecommunications, government services, water, and power and gas 
  • Company earnings for the 2020 financial year may be reduced, but Downer maintains a strong balance sheet and liquidity
  • Downer EDI shares are down two per cent at market open, trading for $3.92 each

Downer EDI’s (DOW) CEO has given a presentation at the Macquarie Australia Conference, outlining COVID-19’s impact on the company.

This year, the three-day conference took place virtually, due to ongoing bans on large public gatherings during the pandemic. On May 6, Downer’s Grant Fenn remotely presented information about how the ASX 100 company is weathering the storm.

Downer, an integrated services company, has operations in a wide range of sectors and industries. Its six main service lines are transport, utilities, rail/bus, engineering, construction and maintenance, and mining and facilities. 

The COVID-19 health crisis and related prevention measures have impacted a number of Downer’s operations. In particular, social distancing measures continue to reduce productivity across the board.

In New Zealand, where level four restrictions have been in place, Downer could only provide 30 per cent of its usual services.

The company’s Spotless business, which it acquired in 2017, has been hit especially hard. Spotless’ hospitality services are bringing in zero revenue, and 6000 staff have been stood down, without any JobKeeper assistance. The business’ laundries are also experiencing reduced volumes from private hospitals, due to elective surgery deferrals.

Downer’s mining operations have been impacted by travel restrictions and other related changes to work practices. Most notably, the company’s Palabora mine in South Africa has closed down as a result.

Downer’s Yarra Trams franchise in Melbourne is also feeling the pinch on its farebox, due to reduced patronage.

Despite these numerous damages, COVID-19 has mercifully left some operations untouched. Downer reported that the pandemic has not materially affected demand for many critical services. These include roads, railway vehicles, power and gas, water, telecommunications, defence consulting, health and education, management of defence bases and estates, and government services. 

Downer’s CEO stated that the company’s immediate priority is managing COVID-19 requirements. Other priorities also include restricting capital expenditure, reducing costs, all with the mindset that ‘cash is king.’

The company acknowledged that earnings for its 2020 financial year will likely be reduced, due to COVID-19 and restructuring costs. However, Downer has a strong balance sheet and significant available liquidity, including a $500 million Syndicated bank facility.

Downer EDI shares are down two per cent at market open, trading for $3.92 each at 10:38 am AEST.

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