THE Commonwealth Bank has given cash-strapped construction company CEC five months' breathing space to reduce its debt. 

But investors won't see a dividend this year as the company prepares for an after tax loss of up to $15 million.

In an announcement that provided little encouragement to the stockmarket yesterday, CEC chief executive Roy Lavis and chairman Rob Borbidge said they were confident the sale of "non-core" assets and continued restructuring would return the company to profit.

However, yesterday’s statement is a long way from the February half-year forecasts which touted a $15-$20 million operating profit and a 12c dividend.

By the close of trade yesterday CEC shares had fallen to 43.5c on the back of almost 380,000 sales, a 27.5 per cent fall in the company’s market value.

The announcement said the company’s bank had agreed to the five-month extension after it had met certain conditions following the expiry of its debt facilities at the end of last week.

CEC’s debt to the Commonwealth is more than $130 million but the company is confident it can reduce debt to a level to satisfy the bank and also return cash flow for hard-hit suppliers.

CEC attributes its confidence to recently completed land sales, other sales that have now gone unconditional, corporate cost reductions, and building houses to meet the market rather than large scale developments that return little profit.

Company spokesman Andrew Griffiths said CEC’s future was looking up.

"The past few months have been very challenging but the hard work and hard decision are paying off," Mr Griffiths said.

"The CEC Group is an iconic company in Cairns and we have had incredibly strong support from every quarter.

"I believe we have turned the corner and although the road ahead is bound to have a few challenges we all feel that we are on track to a brighter future."

Market analyst Michael Ryan of ABN Amro Morgan said the debt extension and the news that Centro had also received an extension on its massive debts was an indication the banks were showing patience.

"CEC is obviously managing its asset sales but at the same time the acceleration of some of those sales from its land bank is tearing up the balance sheet," he said.

Meanwhile, there are strong indications CEC will not go ahead with a $30 million deal to buy City Pacific’s stake in the Townsville Ocean Terminal project. The due diligence on the deal was to expire yesterday but City Pacific said it "had not received formal notice from CEC that the sale of the future development area will not proceed".

Neither Mr Lavis nor Mr Borbidge returned calls from The Cairns Post yesterday.

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