FORGE Group's shareholders have been punished after the company announced another profit writedown, bringing the total in less than two months to up to $155 million.
The latest problems for the Perth engineering group relate to a $23 million to $28 million cost blow-out at the West Angelas Power Station Forge is building for Rio Tinto in Western Australia's Pilbara.
The total profit hits associated with that project and its DPS station in Mt Isa to $150-155 million following a $127 million writedown in late November.
On Tuesday morning, Forge's shares came out of a two-day trading halt and plunged 30 per cent.
It clawed back to close 22.5 cents, or 18 cents, down at $1.025, representing a $19 million-plus fall in market capitalisation to below $90 million.
The shares were $6.90 10 months ago.
Forge shares plummeted 84 per cent, losing $300 million in its market value, in one day in late November when it came out of a three-week trading halt to announce gas station writedowns and forecast an annual loss of up to $90 million.
Forge chief executive David Simpson said, in a teleconference, that Rio Tinto, the bank and Forge's other financiers continued to back the company and that the extra net costs of up to $19 million announced on Tuesday would come out of existing funds.
ANZ Bank stepped in as creditors late last year with more generous debt facilities to rescue Forge from a cashflow crisis and possibly administration when it had to find $45 million to complete the gas power station contracts.
However the deal gave ANZ warrant options over 13 per cent of Forge's shares which, if exercised, would dilute other shareholdings.
Mr Simpson said the company had only uncovered the extra engineering and other needed work last week, and that it would delay the West Angelas project by three months.
The plant is due to be completed by August this year.
"The market announcement comes to us today regrettably,' he said.
OptionsXpress market analyst Ben Le Brun said he thought Forge might still need a capital raising, which some thought could be avoided through its new debt deal.
"The downgrade of the power stations was unfortunate as the new power division was expected to insulate the company somewhat in light of the broader mining slowdown," he said.
The company had some good news, however, announcing that it had secured bonding facilities from financiers backing its recently won $1.5 billion contract with Gina Rinehart's Roy Hill iron ore project.
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