The Ausdrill Ltd (ASX: ASL) share price fell 6.8% after announcing a “Non Cash Impairment” for its 2019 Financial Year.

Ausdrill is an international mining services group, providing leading-edge drill and blast, exploration, supply and logistics services to the world’s major mining companies.

What Does a “Non-Cash Impairment” Mean?

Ausdrill advised that upon reviewing its working capital position and balance sheet that it will incur a $75 million to $95 million impairment to the value of its assets. This equates to about 2.8% to 3.6% of Ausdrill’s total asset base.

Ausdrill also previously announced it would incur a $31 million write-down of its subsidiary Energy Drilling Australia in its 2019 Half Year Report.

Although this reduces the value of assets which will be disclosed in Ausdrill’s upcoming 2019 Annual Report, it will not impact day-to-day operations of the business or the cash flow they generate.

Is There Any Positive News?

There was one recent positive announcement made by Ausdrill, in which its equipment subsidiary, BTP, was awarded a three-year extension worth $126 million with Peabody Australia. Peabody Energy Corporation (NYSE: BTU) is one of the largest private sector coal miners in the world.

Is Ausdrill A Buy?

While the share price of Ausdrill is a lot cheaper now, I don’t believe it is ‘undervalued’. With a string of recent asset write-downs, one might wonder if further writedowns are just around the corner.


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Disclaimer: Any information contained in this article is limited to general financial/investment advice only. The information has not taken into account your specific needs, goals or objectives, so please consider consulting a licenced and trusted adviser before acting on the information. Please read The Rask Group’s Financial Services Guide (FSG) for more information. This article is authorised by Owen Raszkiewicz of The Rask Group, which is a corporate authorised representative No. 1264179 of Strawman Pty Ltd (ACN: 610 908 211) (AFSL: 501 223).

At the time of publishing, William does not have a financial interest in any of the companies mentioned.