Fresh from its disastrous handling of last year’s big loss, Downer EDI appears to be riding for further shareholder relations trouble and never mind the bottom line in a dispute over work it did for Sydney’s Cross City Tunnel.

The cross-eyed tunnel has been a mess for just about everyone involved and now it’s threatening to cost Downer a $70 million damages claim. That in itself is a problem, but Downer’s attitude, as reported by The SMH’s Scott Rochfort, is a bigger worry.

Downer is the mob that happily went to the market in April to raise $125 million at $8.40 without mentioning Iluka’s $105 million claim against it. Yesterday it was out spruiking new work and acquisitions without enlightenment about the tunnel dispute. Déjà vu all over again.

Downer’s problems though serve as a healthy reminder of the problems facing the whole construction industry during the present boom. From Leightons down, margins are rather thin considering the risks involved.

There is more work available in Australia than the industry can handle. The West Australian government is putting on a road show in Europe trying to encourage more construction companies to operate here. Yet with the industry’s inflation rate in double figures, it is dangerously easy to lose money.

At least investors can hope management will be open with them about those risks. Yes, Downer shares are down this morning.

Peter Fray

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