CIMIC shares crash on ‘soft’ HY earnings

CIMIC Group shares have plunged to a two-year low after the construction contractor, mining services and engineering giant said its profit for the first half was up just 1.0 per cent.

At 1404 AEST on Thursday, CIMIC Group was down $8.19, or 17.9 per cent, to $37.60 – its lowest level since May 2017.

The crash came after CIMIC on Wednesday evening said it had earned profit of $367 million, up 1.0 per cent, on stable revenue of $7 billion.

It announced a 71 cent fully franked interim dividend, up from 70 cents last year.

Responding to the plunge, CIMIC on Thurday afternoon said it would resume a share buyback following a 14-day waiting period of up to 10 per cent of its shares.

UBS analysts Nathan Reilly, Evan Karatzas and Anshul Baruah called the results “a little on the soft side”, with profit was 5.0 per cent less than what UBS was expecting and reduced their price target on CIMIC from $50 to $46.

CIMIC said it had a robust balance sheet, with net cash of $1.4 billion and a diversified order book with $36.8 billion of work in hand, up 8.0 per cent since June 2018.

That order book includes the Cross River Rail tunnel in Brisbane, maintenance work on Sydney trains, building an aquatic and indoor recreation centre in Christchurch, work on the Auckland Airports taxiway, Coffs Harbour Hospital expansion work and a number of mining contracts.

It’s also working on road and rail developments in Australia such as WestConnex in Sydney, the West Gate Tunnel project in Victoria and the Logan Motorway project in southeast Queensland.

“At the halfway point in 2019, CIMIC Group remains in a strong financial position,” executive chairman Marcelino Fernandez Verdes said.

“Our net cash and work in hand increased consistently and we have a strong foundation for profitable growth.”

CIMIC said it expected to make $790 million to $840 million for the fiscal year.

Construction was 44 per cent of its business in the first half, followed by mining and mineral processing, services, and corporate work.


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