NRW delivers mixed result

NRW Holdings posted record sales and issues an upbeat outlook, but net profit missed expectations.

Mining and civil engineering group NRW Holdings (NWH) posted a record top-line result and issued an upbeat outlook despite missing consensus earnings estimates due to higher than expected cost pressures.

Management says revenue inched up 1% to $1.37 billion while net profit tumbled 24% to $74.1 million for the year ended June 30, 2013. This effectively means that net profit margins have fallen 180 basis points (or 1.8 of a percentage point) to 5.4%.

Analysts were forecasting sales of $1.33 billion and net profit of $75.2 million for the period.

Underutilisation of assets and personnel, together with redundancy costs contributed to the margin squeeze.

However, management is upbeat on its future and is forecasting revenue of between $1 billion to $1.2 billion for the current financial year, although it believes operating conditions will stay tough for the rest of the calendar year (see A mining services revival?).

The sales forecast is about in-line with consensus expectations, but analysts are likely to lower their earnings estimates on the back of the latest result.

The group also delivered a smaller than expected divided of 13 cents a share for 2012-13 and the consensus for the current year’s dividend might be pared.

But that is unlikely to shock the market as there had been speculation that its dividends will fall more than analysts were predicting given its current share price implied a yield well in excess of 10% once franking credits are included.

The stock, which is part of the Uncapped 100, dropped half a cent to $1.14 at 1028 AEST compared to fall of 1.4% in the wider market.