Mining contracts strengthen CIMIC performance

CIMIC Group has delivered strong results for the 2020 March quarter, with its mining operations showing growth during the recent impact of COVID-19.

The company’s revenue stood at $3.3 billion in the quarter, delivering a net profit after tax of $166 million.

This included a $100 million contract awarded to its subsidiary, Thiess as part of a five year framework agreement with Rio Tinto Iron Ore in Western Australia.

Another CIMIC subsidiary, UGL, saw $180 million in combined revenue for its maintenance, shutdown and project services to its mining sector clients.

According to CIMIC chief executive Juan Santamaria, the quarter demonstrated the company’s dedication to sustaining a strong balance sheet and cashflow.

“During the first quarter, we maintained a disciplined focus on sustaining a strong balance sheet, generating cash, and taking a rigorous approach to tendering, project delivery and risk management,” he said.

“We continue to pursue an increasing number of contracts that effectively manage risk in construction (such as alliances and collaborative partnerships, and managing contractor and cost reimbursable contracts), and grow our longer-term contracts in public-private partnerships (PPPs), services and mining and minerals processing.”

CIMIC has not announced any updates to its 2020 profit guidance, with the company’s executive chairman Marcelino Fernàndez Verdes noting that it was too soon to get a clear picture of the consequences of COVID-19 on the business.

“Notwithstanding the short‐term impacts from the evolving COVID‐19 situation, the outlook across the group’s core markets remains positive. Once we have better visibility of the consequences of COVID-19 on the business we will provide an update to 2020 profit guidance, if required,” he said.

Verdes also noted that CIMIC was continuing its development projects, while prioritising the health and safety its people.

“This includes operating and maintaining heavy, automated and light rail networks and infrastructure in Sydney, Melbourne, Canberra and Perth, and the continued operation of major mine sites across Australia and internationally,” he said.

Over the last 12 months, CIMIC’s operating cashflow saw an increase from $749 million to $1.64 billion. The company said a healthy expansion to mining portfolio in Australia was responsible for part of this cashflow increase.

In August 2019, UGL was awarded $260 million in new Australian rail and mining services contracts.

Rio Tinto provided CIMIC’s CPB contractors with three separate packages worth $150 million in December 2019.

In January this year, CIMIC also secured $180 worth of contracts across Western Australia and Queensland through UGL.

CIMIC currently has $36.1 billion of work in hand, which the company stated was equivalent to two years’ worth of revenue.

For mining and mineral processing, CIMIC currently has $9.68 billion work in hand, compared with $10.14 billion in the 2019 December quarter.

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