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PERTH, Nov 9 AAP

November 09 2012, 6:47PM

Shareholders have delivered MacMahon Holdings its "first strike" over executive pay amid widespread anger over a recent earnings downgrade and a forecast first half loss.

More than 28 per cent of shareholders voted against the mining contractor's pay report on Friday as it undertakes a major review of costs and sheds up to 50 jobs.

A commitment from executives to take a 10 per cent salary cut for the remainder of the 2012/13 financial year was not enough to stem the voter backlash on Friday.

Despite flagging a loss early next year, MacMahon's new chief executive Ross Carroll said further executive pay cuts would not be necessary.

"I don't think so," Mr Carroll said after the company's annual general meeting in Perth on Friday.

"MacMahon is quite a big, complex company, and sure it's underperformed profit wise, but you're talking about a company of 4500 employees operating in six countries and I don't think our pay is out of step with our peers."

Mr Carroll said pay was a function of the mining industry and competition for resources.

"Sure we're well paid, but the industry we're in, people are very well paid."

If at least 25 per cent of shareholders vote against the company's remuneration report again in 2013, it could pave the way for a board spill.

In September, MacMahon said cost overruns at its Hope Downs 4 rail project in Western Australia as well as the expectation of fewer contract wins, meant its profit for 2012/13 would be about half that of the previous year.

But retail shareholders were sceptical about the timing of the company's announcements.

Mr Carroll said the company knew the project was in a "little bit of trouble" and booked a loss on June 30.

"The position escalated very quickly during July and August and it was really when we got the August financial results early in September that we saw the deterioration was there," he said.

He said the company initially thought it had enough contingency to cover the loss and meet guidance.

The Hope Downs project would almost be completed by Christmas and Fortescue's Solomon Spur project, also in WA, was nearly finished.

Mr Carroll also conceded MacMahon was close to breaching its debt covenants and would require careful management during the next six months.

Over the past three months almost 50 employees have been made redundant, but there were no plans for more redundancies, he said.

MacMahon has introduced a hiring freeze, reduced its office space and cut discretionary spending in a bid to save more than $10 million.

Chairman Ken Scott-Mackenzie said the company could expect to return regular profit margins in the second half in line with the company's earnings guidance.

"There does remain ongoing risk over the major construction projects, however many of these projects are currently near completion," he said.

MacMahon will look to "claw back" short-term incentives for executives and eliminate time-based long-term incentive awards.

MacMahon shares closed flat at 30 cents on Friday.

By Kim Christian