Monsters of Rock: Mixed bag for mining services stocks as reporting season rolls on
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Rising investment in exploration and buoyant commodities markets provided a boost for mining services stocks in the latter part of the 2021 financial year.
Some of the biggest contractors on the ASX reported their 2020-21 earnings today, while nickel miner Western Areas (ASX:WSA) reported an expected $7 million loss after missing badly on nickel production in the first half of 2020-21 due to issues at its Forrestania nickel mines.
WSA boss Dan Lougher told analysts on the company’s quarterly call he would not be able to comment on the discussions the company is having with Nova nickel mine owner IGO (ASX:IGO) and was coy when asked what discussions he had with Andrew Forrest’s Wyloo Metals, which emerged as a substantial shareholder shortly after the IGO negotiations were revealed.
Gold bounced back over US$1800/oz (~$2500/oz) overnight leading to some positive movement from the gold sector while the “oversold” Fortescue Metals Group (ASX:FMG) rose 0.62% to 3.35PM AEST after some heavy losses over recent trading days. BHP and Rio were also higher.
Copper-gold miner OZ Minerals (ASX: OZL) was the top gainer among the resources large caps, up 3.71%.
EPC experts GR Engineering came out smelling like roses with a 13% rise on a $33.7 million profit before tax.
That came on the back of revenue growth of 76% to $392.4m and EBITDA of $37.2m, powering an 84% increase in end of year cash to $69m and a 7c per share fully franked dividend, for a total payout of 12cps over 2021.
GR has won a number of contracts into 2022 that have given investors confidence in its longer term pipeline, starting work in July on the $101 million expansion of Northern Star Resources (ASX:NST) Thunderbox mill in the Goldfields, a $75m contract on Calidus Resources (ASX:CAI) Warrawoona gold project and a $25.7m job with Wiluna Mining Corporation (ASX:WMX) among others.
Revenues are expected to rise again to $440-460 million in 2022.
Driller and contractor SRG’s revenues were steady in FY21, up just 4% to $570m, but its margins were much better, with EBITDA climbing 61% to $47.1m and a record $1 billion of work in hand, up 41% on the end of FY20.
SRG’s FY2022 EBITDA is expected to be another 15% higher still on its 2021 result after it reversed an $8.4m net debt position at June 30, 2020, into a $12.2m net cash position at the end of June this year.
The company declared a final dividend of 1cps for a total of 2cps across the financial year.
Perenti and Monadelphous’ final results did not resonate with investors, with Monadelphous losing a whopping 14.3% despite registering a 29 per cent uplift in NPAT to $47.1m.
Monadelphous said full year revenues were likely to be lower in FY22 than FY21 because a number of large contracts were ending and noted the impact of Covid related skills shortages.
“While market conditions are expected to be strong, COVID-19 impacts and the skills labour shortage will continue to be a major challenge for the industry. Our attraction and retention initiatives, strategic approach to targeting new work and collaborative working relationships with our customers will become more important than ever,” MD Rob Velletri said.
Monadelphous will pay a 21cps final dividend (45cps for the year).
Perenti swung from a $63.8m statutory loss in the first half of 2021 to an $11.5m gain in the second half, with stable revenue of $2.02b and underlying EBITA of $170.8m across the year.
But it expects relatively flat revenues of $2-2.2b and EBITA of $165-185m in FY22 “on the basis that Covid-19 impacts do not worsen”.