The Cimic Group Ltd (ASX: CIM) share price has seen little reaction to the announcement of a $2.5 billion mining services contract win, dipping 1.22% to $22.70 per share at the time of writing.
Cimic’s global mining services provider, Thiess, was awarded a 5-year contract extension to continue to provide mining services at the Lake Vermont Coal Mine in Queensland. This will generate $2.5 billion in revenue for Thiess and continues its full-service mining operations including mine planning, coal mining, topsoil and overburden removal, drill and blast, water management and rehabilitation of final landforms.
What does Cimic do?
Cimic is in the construction, mining, services, and public private partnerships industries. It works across the lifecycle of assets, infrastructure, and resources projects. The group includes a construction business and mining and mineral processing companies Thiess and Sedgman. It also includes the public private partnerships arm and services specialist, with all divisions supported by an in-house engineering consultancy.
How has the Cimic share price been performing?
The Cimic share price took a beating in the March downturn, falling nearly 60% from a February high of $30.93 to just $13. The price bounced back quickly however, and has traded in the range of $22–$28 since April. Last month, Moody’s affirmed the company’s strong investment grade credit rating of Baa2, with a stable outlook.
Cimic reported a marginal decrease in revenue in the first quarter of 2020, with revenue of $3.3 billion compared to $3.4 billion in 1Q19. It earned net profits of $166 million and reported a gross cash position of $4.5 billion. Cimic was awarded $2.5 billion of new work during the quarter and had work in hand of $36.1 billion. This is equivalent to more than two years’ worth of work and provides strong visibility.
What is Cimic’s outlook?
Cimic’s outlook has remained positive in the face of COVID-19. In a market announcement in May, executive chair Marcelino Fernandez Verdes stated:
Our priorities at this time are the continued provision of essential services and critical infrastructure for the communities where we operate. We have kept our projects going and working productively to help support the economy at a time when it’s very much needed.
Looking ahead, governments have announced they will accelerate major social, transport, and infrastructure projects to create jobs and stimulate economic growth. Cimic is in a position to support this demand for critical infrastructure and create long-term value, which could have some impact the Cimic share price moving forward.
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Motley Fool contributor Kate O’Brien has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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