S&P/ASX 200 Index (ASX: XJO) stock Downer EDI Limited (ASX: DOW) is down 2.6%, having earlier posted losses of 5.9%.
Shares in the ASX 200 engineering, construction and maintenance services company closed yesterday trading for $4.43. At the time of writing, shares are trading for $4.32 apiece, up from $4.17 in morning trade.
Here's why the ASX 200 stock is under pressure on Thursday.
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Why are investors bidding down the ASX 200 stock?
The Downer share price is in retreat after the company reported it expected to recognise a non-cash, pre-tax impairment charge of $550 million in its 2023 financial results. Downer reports its FY23 results next week, 10 August.
Downer CEO Peter Tompkins said, "FY23 was a challenging year for Downer. As we announced at the Investor Day in April, Downer is undergoing a period of significant and necessary organisational change."
Addressing the write-down putting the ASX 200 stock under selling pressure today, Tompkins said:
There are several factors that we have considered in assessing the carrying value of assets, including recent business performance, changes in market conditions and changes in key assumptions arising from the business transformation that commenced in February 2023.
Most of the non-cash impairment charges ($483 million) relate to goodwill impairments for Downer's Facilities and Utilities Cash Generating Units. Facilities goodwill impairment totals $350 million, while Utilities goodwill impairment totals $133 million.
The company noted that the impairment charges were non-cash and that the company's liquidity position remained "strong with significant headroom remaining under all debt facility covenants with lenders".
Tompkins said despite the challenging year, "We have delivered underlying earnings in line with what was previously communicated, and we are building positive momentum in the transformation program."
Looking to what's ahead for the ASX 200 stock, he added, "We remain on target to achieve the overall transformation cost-out benefits of $100 million per annum in FY25."
Downer share price snapshot
The Downer share price has fallen 21% over 12 months.
But 2023 has seen a big turnaround for the ASX 200 stock. Shares are up 17% since the closing bell on 3 January.
