Cimic
(ASX: CIM) announces profit growth in the first nine months of 2019, is it time to buy shares?
Cimic Group was formerly called Leighton Holdings. The company changed its name shortly after some bribery scandals emerged in the news and it was acquired by its majority shareholder, Spanish firm Grupo ACS. On a more positive note, Cimic is today a major international construction and mining contractor with brands like UGL, CPB Contractors, Thiess, Broad and Sedgman under its banner.
Cimic’s Growing Profit
The engineering business said that in the first nine months of 2019 net profit grew by 2% to $573 million and revenue was stable at $10.7 billion (excluding revenue from joint ventures and associates).
Cimic reported that it achieved operating cash flow of $811 million, which was up $500 million compared to the first nine months of 2018 (before factoring).
One of the most important things with these huge projects is to keep profit margins at good levels. Cimic had EBIT (click here to learn what EBIT means), profit before tax and net profit after tax margins of 8.2%, 7.3% and 5.3%.
In terms of its balance sheet it had net cash of $826 million and work in hand of $37.2 billion – which is up 6% over the year. And it has been awarded $13.1 billion of new work so far in the year, which is 11% higher compared to last year.
The company confirmed its 2019 profit guidance of a range of $790 million to $840 million as long as market conditions remain supportive.
Cimic Executive Chairman Marcelino Fernandez Verdes said: “CIMIC Group is on track at the end of the third quarter. The positive outlook across the Group’s core markets supports our full year guidance.
“The mining market continues to strengthen, investment in infrastructure is driving construction and services, and we have a unique position in a growing PPP market.”
Big money can be made on these large infrastructure projects, but there are plenty of potential risks too. It’s not the type of business I’d go for in my own portfolio, I like businesses which don’t have such complex routes to getting paid, such as the ones in the free report below.
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