Why the CIMIC (ASX:CIM) share price is charging higher

The CIMIC Group Ltd (ASX: CIM) share price is pushing higher today after the international construction, mining and services group announced two contract wins.

CIMIC shares have jumped nearly 5% in early afternoon trade, while the S&P/ASX 200 (ASX: XJO) is up more than 1%.

What’s moving the CIMIC share price?

This morning, CIMIC announced that subsidiary CPB Contractors has been awarded two contracts for resources and water projects. The contracts will provide a total of $128 million in revenue.

The first contract is for the Iron Bridge Magnetite Project, a joint venture between Fortescue Metals Group Limited (ASX: FMG) subsidiary Iron Bridge and Formosa Steel. CPB will deliver concrete and detailed earthworks for a wet processing plant at the project, which is located in Western Australia’s Pilbara region. Work will commence this year and is scheduled for completion in 2021.

The second contract is with Sunwater, a Queensland Government-owned water service provider, which will see CPB undertake essential works at Paradise Dam, near Bundaberg in Queensland. Work commenced in May 2020 to lower the spillway of the dam and ancillary works will be completed into 2021.

Management commentary

Commenting on the contract wins, CIMIC Group CEO Juan Santamaria said: “The range of work being won by CPB Contractors demonstrates the extent of the capability that we provide to clients to produce reliable, safe and efficient outcomes. We are pleased to support major corporates and governments in the delivery of these projects.”

Meanwhile, CPB Contractors Managing Director Diego Zumaquero said: “The award of these contracts is recognition of our people’s expertise in delivering essential and strategic infrastructure projects. Our commitment is to safely and efficiently deliver these projects while maximising the benefits to local communities.”

Now what?

CIMIC recently delivered its half-year FY20 report to investors, revealing an 11% fall in revenue to $6.2 billion. Net profit after tax fared slightly worse, dropping 14% to $316.6 million.

Looking forward, Mr Santamaria said CIMIC’s outlook across its core businesses remains positive. However, COVID-19 has led to a temporary delay in the award of new projects and slowed down revenues in certain parts of its business.

In light of these comments, today’s announcement is welcome news for shareholders. CIMIC shares were last seen trading at $23.77, meaning shares have fallen 28% year to date.

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Disclosure: At the time of publishing, the author of this article does not have a financial or commercial interest in any of the companies mentioned.

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