MACA Slammed On Earnings Downgrade

It’s been an all too familiar for the mining services sector in the past few years. Tough times for clients means cost cuts, investment spending curtailed and job losses. Add to that a now equally familiar story of acquisitions underperforming, or going bad, and the result has been a shock downgrade and a pounding from worried investors who send the shares south.

So that is what happened to mining and civil contractor, MACA yesterday. A shock downgrade, news of weak returns from two recent buys and down the shares went – falling 22% to end at $1.72.

In the case of MACA is was more than weak returns from under-performing projects in two businesses acquired last year.

The problems occurred within the 60% owned MACA Interquip and the company’s Victorian civil and infrastructure division.

As a result, MACA said it expected a half-year profit of $10 million to $12 million. The company earned a net profit for the December half of 2016-17 of $16.6 million.

Analysts covering the company had been forecasting a full-year net profit of about $34 million.

The company forecast earnings before interest, tax, depreciation and amortisation for the half of $39 million to $41 million. Analysts had tipped full-year EBITDA of about $100 million, which was similar to the $99.1 million the company reported for 2016-17.

“These estimates exclude any potential impairment which may arise when the carrying value of goodwill associated with these divisions is reviewed in the course of preparing the half-year accounts,” MACA said.

The company’s annual revenue guidance was unchanged at $560 million.

MACA bought a majority stake in WA mining services and equipment provider Interquip a year ago for $8 million. It also bought into Victorian road asset management and maintenance service provider Services South East last year.

“The group continues to win moderately sized, shorter-term civil jobs in both Western Australia and Victoria,” MACA said yesterday.

It said the mining division continued to “perform largely in line with expectations and with a slightly lower EBITDA margin”, following the end of work at Atlas Iron Abydos iron ore mine in the Pilbara.

“MACA remains very positive on its future pipeline of work and the company’s strong financial position makes it ideally positioned to win new work from this pipeline.”

It is in contention for a number of significant mining and crushing projects. “If successful, the impact of being awarded these projects is expected to materially contribute to earnings in FY19 and beyond,” its outlook commentary said.

But no figures for guidance – in other words, the outlook isn’t too clear and won’t be until early next year when there is an accounting for the problems in the two acquisitions and decisions on impairments.

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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