Civmec kicks off 2023 with order book over $1.5bn

Civmec (ASX:CVL) confirmed its receipt of a $300m contract from Rio Tinto (ASX:RIO) on Tuesday. 

The move sees Civmec commence the new year with an order book of over $1.5bn in works. 

Regarding the latest contract, Civmec will build out the fundamental assets of Rio’s Western Range Project, an iron ore play, which will be completed in the first half of 2025. 

At the peak of the project’s construction, 400 employees will be active on-site.

Civmec detailed the particulars of the contract, outlining it covers both brownfield (modifications to existing infrastructure) and greenfield (construction of entirely new assets).

Broken down, those elements include: 

Greenfield

• A new Run of Mine (ROM) pad 

• Primary rock crushing facility 

• Discharge conveyer belt and transfer station 

• 17km long overland conveying system

Brownfield 

• Coarse Ore Stockpile (COS) modifications 

• Downstream conveying infrastructure 

The COS modifications in particular include the further build-out of conveyor belt systems, while the overland conveyor will consist of multiple conveyor flights, transfer stations and creek crossings. 

Made in WA 

Civmec will manufacture the steel platework needed to complete the contract at its facility in Henderson, WA, half an hour south of Fremantle and in the same complex housing Austal’s (ASX:ASB) shipbuilding yard. 

The company will also construct modules at Henderson “where possible” for outright transport direct to the Western Range project site. 

Civmec will also be responsible for earthworks and concreting, as well as electrical, piping, and mechanical works. 

Off-site works at Henderson are to commence immediately. 

Furthering relationship with Rio

“We are very pleased to be awarded the Western Range project, which further enhances our long-standing relationship with Rio Tinto,” Civmec chief Patrick Tallon said. 

“This allows us to start the new year with an order book in excess of A$1.150 billion.”

Shareholder reaction to Civmec’s news on Tuesday could be considered subdued, though, overhead macro considerations impeding the industrials sector (read: vulnerable to inflation) continue to inform trader behaviour. 

“The fact that we will be utilising our manufacturing facilities to supply our construction site teams, across several disciples, strongly aligns with our business model to provide multi-disciplined solutions,” Tallon added. 

Considerations 

Civmec one year returns are currently down -10.7%. 

The company has a market cap of $150.9m. 

Market Index’s broker consensus scan notes five brokers recommend “buy” while one recommends “hold”. 

Civmec is ranked 61 of 189 players in the Industrials sector. 

The company has not released a quarterly for September. 

However, a Q1 FY23 business trading update released in October outlined the following results, with percentages relevant to Year on Year (YoY). 

• Revenue of $228.3m (up 15%)

• Earnings of $25.7m (up 20.2%) 

• Profit-after-tax of $14.2m (up 31%) 

• Net profit margin of 6.2% 

A look at Civmec's charts since it listed in August 2018