Amid the doom and gloom, three mining services companies yesterday reported earnings results that have bucked the trend for the industry and pleased investors.
And the market reaction bucked the recent negativity and the shares of all three rose.
Monadelphous Group (MND) (up 9.7% to $17.10 ) was one (MacMahon (MAH) shares up 12% to 14c and RCR Tomlinson (RCR) up 2% to $2.98), all reported interim figures to the ASX yesterday.
Monadelphous released a record half-year profit of $87.1 million, up 10.1% on the previous corresponding period.
That might be as high as it gets with the company predicting a sharp fall in second half revenues, and trimming dividend as a precaution.
Revenue for the six months to December was down 1% to $1.28 billion, and the company expects about a 10% decline in sales for the 2014 full year.
An interim dividend of 60c was declared, down from 62c this time last year, which was to be expected given the weak forecast for the current half year.
“In response to the change in market conditions, the company has achieved annualised cost savings of $34 million to date through a program focused on consolidating and right-sizing the business,” Monadelphous Managing Director Rob Velletri said in a statement, who added that the company continues to win new contracts.
“While mining and minerals markets have softened, bidding activity in the oil and gas market remains high and the company is in a strong position to secure new contracts in both upstream and downstream LNG developments,” he said.
The reason for the sharp rise in Monadelphous share price: the realisation that the downturn in the mining sector hasn’t damaged it as much as it has hurt others, like the just collapsed Forge Group.
RCR Tomlinson reported a rare result from the sector – a higher profit and dividend.
The company posted a 14.2% higher interim net profit at $18.3 milllion, which includes the $140 million purchase of the struggling contract engineer and electrical services group Norfolk.
Excluding the transaction costs of that purchase, revenue was up 81% to $701.7 million, and profit up 38% at $22 million. And much of that extra contribution came from the Norfolk purchase.
So no move to keep the payout steady and conserve cash ahead of the second half.
RCR declared a 30% franked dividend of 3c a share, against the previous corresponding payment last year of 2.5c. That was a rise of 20%.
Directors said the company had a record order book of $849 million at the end of December.
The shares were up more than 4% during trading, but the gains were halved in late afternoon trading.
MND Vs RCR Vs MAH 1Y – RCR bucks trend, but no Forge flop here, just three survivors in mining services
And the last of the trio to report yesterday was MacMahon, which revealed that it had returned to profitability in the December half year, but there was no joy for shareholders.
Directors said the December half performance was "a creditable result in what continues to be a difficult market".
Net profit for its continuing operations fell 24% to $17.5 million, from $23.1 million.
The company said over the half it completed its transition to a "dedicated full-service mining contractor" with the last of its construction contracts either completed or sold – a segment that had cost it $60.7 million in net losses in the previous year’s December half.
"This result includes a provision for doubtful debts against the Tavan Tolgoi project in Mongolia," said the company, which constituted "a conservative approach to the recovery of outstanding debtors".
Without those provisions, the mining segment’s profits would be "in line" with the previous corresponding period, the company said.
The company said its mining order book was 54% higher to $2.8 billion.
MacMahon was the only one of the three not to pay an interim dividend.
Directors did warn that the difficult conditions in the mining sector "was pressuring margins and making it harder to secure gain new work".
Is that a hint of bad news for the second half?
