Over $1bn of contracts announced in August

During the month of August, over $1bn in new contracts were announced by companies in our index. This represents the highest monthly award total for this calendar year, and the first month during this calendar year that contract awards were over $1bn.

Contract awards were led by several large Maintenance & Industrial Services (M&IS) contract awards, including 4-year agreements (with two additional 2-year options) awarded to DOW and SSM by NBN Co. If maintained for the full 8-years, DOW expects its contract to be worth $320m, whilst SSM expects its contract to be worth $60m in its first year, and grow in the future.

Key points from the E&C reporting season summary:

Engineering Construction & Building work struggled

Most Engineering & Construction (E&C) and Building workloads saw material impacts from COVID-19. This came in the form of productivity declines, supply chain issues, difficulty in moving workers between sites and the delay and deferral of new workloads. This impacted both revenue and margins.

Utilities more resilient but not without impact

Those exposed to Utility workloads (like DOW and SSM), generally saw more resilient activity. Despite this, some non-essential maintenance work was reported as being delayed. Much of this was done in order to maintain the continuity of services whilst individuals remained at home. Contractors also generally saw some increased costs and impacts to productivity as a result of additional safety protocols.

Mining Services workloads remain strong

The key shining light amongst firms within our E&C index, were Mining Services workloads. Most operators that had Mining Services operations were able to continue working throughout the pandemic relatively unfazed. Many were able to materially grow their revenues, and margins remained solid across the sector, with some firms materially growing their Mining Services profitability. This comes as the Australian Mining sector saw little disruption to operating activities, and miners continued to focus on maintaining/growing output in light of commodity prices that have proven resilient.

E&C index rises in August

After falling significantly since its inception in January, the BP E&C Index rose materially in August, increasing in price by 8.2%. This was an important positive move on the back of reporting season. While a positive monthly move, the index remains 34.7% below where it began the year.

In order to see what moved the share prices of these company’s during August, please read on, where you will find a summary of each company’s result, broken down into the Good, Bad, and the Notable, as well as summaries of key financial information.

Authored by Steven Anastasiou – Analyst at Bell Potter Securities, 30 September 2020
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