- Shares in NRW Holdings (NHW) have nosedived this morning following the release of the company’s latest half-yearly financial report
- While the mining contractor boosted revenue and earnings for the six-month period, it seems investors couldn’t look past some softer margins
- Revenue increased 44 per cent compared to the previous corresponding period, but net profit fell roughly 17 per cent to $29 million
- On top of this, NRW’s earnings margin for its mining segment was 17.8 per cent during the December 2020 half-year compared to 20 per cent the year before
- The company blamed COVID-related restrictions and border closures for the soft margins
- Nevertheless, NRW reaffirmed its 2021 financial year revenue guidance and declared a 4-cent interim dividend, which is 60 per cent higher than last year’s interim dividend.
- Still, shares in NRW are down almost 18 per cent this morning to trade at $2.30 per share
Shares in NRW Holdings (NHW) have nosedived this morning following the release of the company’s latest half-yearly financial report.
The mining contractor has reported increased revenue and earnings for the six months to the end of December 2020, but it seems investors are somewhat underwhelmed as NRW shares sit more than 17 per cent in the red.
Why the drop?
NRW booked nearly $1.2 billion in revenue for the half-year, which is a 44 per cent increase on the same half-yearly period in 2019.
On top of this, earnings before interest, tax, appreciation, and amortisation (EBITDA) jumped to $132.8 million — 28 per cent higher than the previous corresponding period.
However, despite these sturdy earnings, it seems investors couldn’t look past some weaker company margins.
NRW’s net profit came in at $29 million for the half-year, which is around 17 per cent lower than the same time the year before. The company said the margins on its Pilbara projects were impacted by resource availability and COVID-19-related restraints.
For its mining segment, in particular, NRW’s EBITDA margin was 17.8 per cent during the December 2020 half-year compared to 20 per cent the year before.
Company confidence
Still, NRW CEO and Managing Director Jules Pemberton said the company delivered a “record” first-half revenue despite the challenges brought on by COVID-19.
“Our entire workforce has continued to work hard every day around the nation despite the different challenges we have faced state by state through the consequences of full lockdowns and partial lockdowns, but in particular the border closure impact which has limited our access to resources through what has probably been the busiest six months in NRW’s history,” Jules said.
“Despite these restrictions, the company has delivered a record first-half revenue, increased earnings and maintained its fiscal discipline by once again delivering a strong cash conversion,” he said.
He added that the strong earnings have allowed the company to update its dividend policy to give between 40 per cent and 60 per cent of earnings back to shareholders.
As such, the company is paying a 4-cent interim dividend — 60 per cent higher than last year’s interim dividend.
What’s next?
Looking ahead, NRW management said it has a strong order pipeline but is still expecting further infrastructure projects to be brought forward to help offset coronavirus-induce economic woes.
In particular, NRW said it is expecting to be awarded $14.1 billion worth of tenders and prospects over the next 12 months, with $5 billion of tenders already submitted.
In light of this, the company is maintaining its revenue guidance of between $2.2 billion and $2.3 billion for the 2021 financial year.
Jules said the company is expecting strong growth in light of NRW’s recent Primero takeover.
“Working closely with the Primero team since the acquisition announcement has confirmed the opportunities to expand our Minerals, Energy & Technologies (MET) specialised capabilities which will provide leverage for the combined expertise to pursue new business initiatives across a large pipeline of opportunities,” he said.
“The addition of Primero to the MET business represents a further diversification of our strategic platform to offer clients continuity of services across the whole lifecycle of resource projects – from early planning, design, development, construction to operations and maintenance,” he said.
Despite the company’s confidence, however, the market is not responding well. Shares in NRW are lower by 17.86 per cent at 11:39 AEDT to trade at $2.30 each — their lowest point since November 2020.