Civmec Q3 earnings jump 2756.7%, upside expected despite Covid-19 pandemic

AUSTRALIAN engineering firm Civmec on Thursday posted a net profit of A$4 million (S$3.69 million) for the third quarter ended Mar 31, a 2756.7 per cent year-on-year jump from A$141,000 previously.

Net profit margin for the third quarter also increased from 0.18 per cent in 2019 to 4.22 per cent in 2020, which it said was as a result of "improved gross profits, reduced administrative costs and reduced finance expenses being greater than the reduction in other income and increased tax expense".

This comes on the back of a 19.2 per cent rise in revenue to A$95.5 million, from A$80.1 million the year before, which the company attributes to the timing of projects.

BT previously reported that the construction and engineering company had secured some major projects for the second half of its fiscal year.

This includes the delivery of Australia's largest lithium hydroxide plant being built in the south-west of Western Australia for speciality chemicals company Albemarle, and the full vertical delivery of the primary crushing and ore processing facility for Fortescue Metals Group's new Eliwana Mine being constructed in the Pilbara region of Western Australia.

Civmec, which is dual-listed in Singapore and Australia, posted earnings per share of 0.80 Australian cents, up from 0.03 cent a year ago.

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For the nine-month period, earnings rose 103.1 per cent to A$12.1 million, while revenue dropped 37.0 per cent to A$261.6 million.

The company said in a statement that the Covid-19 pandemic has had no significant impact on its operations. It has adjusted its operations to reflect the restrictions imposed by Covid-19, and is working to support the continued delivery of projects for clients.

"The company's lack of any significant reliance on the overseas supply chain has reaped benefits at this time. While many of the measures do come with a cost impact, they are minor compared to the impact that restricted operations could have on the business," it said.

Amid the global uncertainty subsequent to the Covid-19 pandemic, Civmec said it continues to win new work, with its established local supply chains supporting the delivery of vital Western Australian resource projects.

This includes the award of a vertical package incorporating civil, fabrication, structural, mechanical & piping (SMP), and electrical & instrumentation (E&I) works for long-term client Alcoa, along with other manufacturing and construction contracts for Roy Hill, Worley and Woodside, that will be progressively delivered until early 2021.

Civmec CEO Patrick Tallon said: "These packages will employ more than 200 personnel, providing critical employment at a time when many industries are struggling to operate. Our local fabrication capability provides our clients with surety of delivery, and we are very pleased to be given this opportunity to work with long-term partners Roy Hill, Alcoa, Worley and Woodside again."

Additionally, its new 53,000 sq m (usable floor area) assembly and sustainment hall is now prepared for commencement of the current phase of the Royal Australian Navy's Offshore Patrol Vessel (OPV) programme.

"Under the programme, which commenced in late 2018 and will see the delivery of 12 OPVs, the preparation and profile cutting of steel plates for the first two vessels built in South Australia was undertaken by Civmec at its Henderson facility.

"Commencement of construction, with the processing and welding of first steel, of OPV3 has now occurred and the consolidation of the ship's blocks will commence in the new assembly and sustainment hall in the coming months. This will be a continuous process for all 10 OPVs to be built at the company's Henderson complex over the coming years," it said.

The group's order book as at March 31, 2020 was A$767 million.

Shares of Civmec closed flat at S$0.365 on Wednesday.