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It’s only just begun

It’s only just begun

For those hoping that 2014 will see the end of the mining downturn, the fallout may have only just begun.

A bellwether of the Perth market has released profit guidance that paints a very grim picture of economic conditions in the west.

CTI Logistics (ASX: CLX) is the leading logistics/courier company in the Perth area, and is the preferred supplier to the Chevron Gorgon project for heavy haulage. It also manages the Perth distribution centre for Target, Mitre 10 and Godfreys.

According to the announcement, the company experienced slow conditions in October and November, which are typically the busiest months of the first half of the financial year. While the courier division performed to expectations, work in the energy space has been impacted by the mining downturn. There has also been uncharacteristically weak through-put demand from the warehousing client base in the lead-up to Christmas.

That’s a telling indictment against any expected upturn in retail conditions given the warehousing clients include Target, Mitre 10 and Godfreys.

While the exodus of capital expenditure in the mining sector has now been accepted by the market, we consider that investors are yet to fully appreciate the downturn in retail and the profound multiplier effect the mining downturn is having on the broader economy.

This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.

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2 Comments

  1. So many investors ignored Rogers warnings on TTN and suspected conspiracy,short sellers and many other reasons for the share price decline from $2 to $1.80. Even after the first profit warning and savage price decline some investors saw it as a ideal time to double up at lower prices.

    I hope everyone is out of it now as i suspect another profit downgrade is coming at best

  2. David Edmondson
    :

    I note the trading halt for Titan Energy Services (TTN). While I hope for the sake of its investors the announcement is (only) a profit downgrade, I fear it may be much worse than that. Investors should be aware that just because the glossy annual report from their chosen mining services company may advise of contracted work (meant) to endure though 2015, it does not mean that those contracts will be fulfilled. They can be terminated. The number of companies, combined with the limited and shrinking work on hand, indicates the durability of those contracts is questionable at best.

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