CIM CIMIC Group Limited

   By Rhiannon Hoyle 
 

SYDNEY--Cimic Group Ltd. (CIM.AU), the Australian construction company and contract miner, reported a 12% rise in annual profit and forecast higher earnings in 2017 as the company expands through acquisitions and builds its pipeline of projects.

On Wednesday, Cimic reported a net profit of 580.3 million Australian dollars (US$442.9 million) for the year through December, versus A$520.4 million in 2015. The company had earlier forecast annual earnings of A$520 million-A$580 million.

It declared a final dividend of 62 Australian cents a share, up from a payout of 50 cents a year ago.

Cimic said it expects net profit to rise as much as 21% in 2017, to between A$640 million and A$700 million, aided by the recent acquisition of UGL Ltd. (UGL.AU), an Australian engineering services company. In early 2016, Cimic also acquired mineral processing company Sedgman.

"We have a solid basis for growth and our strategic acquisitions provide a platform for further expansion," said Adolfo Valderas, who was appointed chief executive in October. Cimic is majority owned by Germany's Hochtief AG (HOT.XE), which is controlled by Spain's Actividades de Construccion y Servicios S.A. (ASC.MC).

The company has been hungry for deals in recent times and is now pursuing the takeover of Macmahon Holdings Ltd. (MAH.AU), in which it has a more-than 20% stake. Macmahon recently urged shareholders not to sell their holdings, saying the initial view from its independent directors is that the bid undervalues its stock.

Cimic -- which has been buying back its own shares as well -- has also been bolstering its pipeline of work with new contract wins. That pipeline increased to A$34 billion at the end of December from A$29 billion a year ago.

As big Australian miners cut their spending in recent years, the company has increased its focus on winning infrastructure projects to build everything from casinos in Macau to airports in the Middle East -- a strategy that analysts say is paying off.

During 2016, it secured a string of new projects including a light rail development in Australia's capital, Canberra, and the construction of a new tunnel in Hong Kong. Cimic also won some mining projects in places including Canada and Chile, as it looked for work in different countries and commodities.

Cimic said there's about A$100 billion worth of relevant tenders in construction, mining and services up for grabs in 2017.

The company has meantime been working to drive down costs and bolster margins, which fattened to 5.3% last year, up 140 basis points.

In December, it said it would award Executive Chairman Marcelino Fernandez Verdes, who was formerly also CEO, a A$3 million special bonus, saying he has successfully restructured the Australian company's operations and improved its balance sheet.

"Our balance sheet remains strong, with a good level of net cash providing continued flexibility for the next phase of growth," said Mr. Valderas on Wednesday, as Cimic also recorded a fall in net contract debtors of 7.6%, to A$1.4 billion.

Write to Rhiannon Hoyle at rhiannon.hoyle@wsj.com

(END) Dow Jones Newswires

February 07, 2017 18:15 ET (23:15 GMT)

CIMIC (ASX:CIM)
Historical Stock Chart
From May 2024 to Jun 2024

CIMIC (ASX:CIM)
Historical Stock Chart
From Jun 2023 to Jun 2024