Civmec

[Musicwhiz]

Business Times
Published April 12, 2012

Civmec eyes more technologically challenging, higher value activity

SGX newbie upbeat on oil & gas industry outlook in Australia

By Ronnie Lim

AUSTRALIA'S Civmec - whose shares start trading here tomorrow - intends to go into more technologically challenging and higher value activity like structural mechanical piping (SMP) work for the oil & gas and mining industries, and is also eyeing projects beyond Western Australia, like in booming Queensland, executive chairman Jim Fitzgerald said.

But the SGX newbie is not about to rush into any of this. "For the rest of this year, we will focus on the projects we already have, building stronger relationships with existing clients and in consolidating the company after listing for the next phase," he told BT.

It intends to spend a modest $6 million from the IPO proceeds to expand its covered seafront fabrication and modular assembly facility in Henderson, near Perth - which is the country's largest - including building an earlier-planned new office there.

Civmec issued 101 million new shares at 40 Singapore cents each, with 99 million placement shares readily snapped up. A remaining public portion of 2 million shares was 34 times subscribed at the close of the issue yesterday, despite the absence of a launch advertisement. The $40.4 million raised from the IPO accounts for about 20.2 per cent of its total share capital.

Asked why the company - which does civil engineering work for "biggies" like the Gorgon LNG project there and with "blue-chip" clients including BHP Billiton and Rio Tinto - chose to list here rather than Down Under, Mr Fitzgerald said that "the foundations for the move were laid two years ago".

"We had no facility of our own then, and decided we wanted to build one. We spoke to our employees and also to some investors in Singapore and Australia about it, and received a lot of support. We were also planning acquisitions in the future possibly into Asia or Europe, making Singapore an ideal base for that."

That was when Civmec placed its first tranche of shares at 11.8 Singapore cents "based on our earnings at that particular time. Besides, the risks they (pre-IPO investors) took was quite enormous," he said.

"Six months later, when the project contracts started coming in, we placed our second tranche at 23.4 cents, as we had a bit more meat on the plate by that stage."

The latest IPO pricing of 40 cents was based on Civmec's Q1 2012 revenue of $43.7 million and net profit of $5.2 million, and also on book-building, he explained.

Civmec's entry here bears an uncanny similarity to that of competitor Ausgroup, whose Singapore IPO exactly seven years ago of 50 million placement shares with a public portion also of 2 million shares - was also well received. Coincidentally, Ausgroup's share price has been rising recently to match Civmec's at 40 cents.

Mr Fitzgerald said Ausgroup is more into SMP and engineering work, while Civmec is currently more involved in civil projects, like "building concrete caissons, or the footing, for Chevron's offshore platforms, with this nevertheless requiring high skill sets".

Apart from growing its civil engineering business, Civmec has also set its sights on building up its technological capabilities to handle SMP projects in two to three years time, he added.

Its Henderson facility near Perth currently houses 700 workers, from engineers to tradesmen like boiler-makers, and "we could go up to 800 to 1,000 from here".

He noted that the growth outlook in the next four to five years remains strong for Australia's oil & gas and mining industries with an estimated A$406 billion (S$526 billion) of projects and over half of this in Western Australia where all of Civmec's projects are currently.

[Musicwhiz]

The Straits Times
Apr 13, 2012
Civmec starts trading today

SHARES of Australian civil engineering firm Civmec start trading on the Singapore Exchange today.

The firm has raised $40.4 million from its initial public offering, which it plans to use to boost its facilities in Australia.

It has earmarked $6 million to expand its covered seafront fabrication and modular assembly facility in Henderson, near Perth. The expansion will include building a new office.

In addition, Civmec will explore alliances and acquisitions.

It issued 101 million new shares at 40 Singapore cents apiece, with 99 million on placement.

The public portion of two million shares was 34 times subscribed.

The firm's order book includes an A$27 million (S$35 million) contract from Leighton Contractors to construct pre-cast foundations for the Gorgon liquefied natural gas project in Western Australia.

Civmec, which was incorporated here in 2010, has some big names among its initial investors, including Mr Ang Kong Hua, the chairman of Sembcorp Industries and Global Logistic Properties.

Civmec executive chairman James Fitzgerald said: 'Back then, some Singapore investors showed very strong interest and decided they wanted to give us some financial support (to build our own facility and get the business going).

'We will expand within Australia, and will probably expand outside as well.

'Nothing is set in concrete, but the fact that we have an overseas listing in Singapore means that the logical thing to do would be to grow.'

Civmec's order book stood at about $271.8 million as of March 16.

[greengiraffe]

http://www.sgx.com/wps/portal/sgxweb/hom...ouncements

http://info.sgx.com/webcoranncatth.nsf/V...E002941B4/$file/Civmec_NewsRelease.pdf?openelement

GM "run road" liao - make enough money post the darling run and hot on the heels of Woodside's decision to abandon the James Price point LNG project.

[greengiraffe]

Watch out on hype of Aussie mining sector... game seems to be over...

Aussie Contractors are reeling as mining giants slash costs
BY:STEPHEN BARTHOLOMEUSZ From: The Australian May 22, 2013 12:00AM
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IT'S no great shock that the big contracting firms have been revising their earnings across the past week. What has shocked the market, however, has been the extent of the cuts to their forecasts.

Transfield Services became the latest of a string of contractors to slash its guidance for this year, from a range of $85 million-$90m to $62m-$65m.

Last week, contracting heavyweight WorleyParsons said it expected to earn $320m-$340m this year, well below the market consensus expectations of a profit of more than $370m.

UGL, having previously forecast earnings of $150m-$160m, slashed its guidance to a profit of $90m-$100m. The far smaller Coffey International, which had been forecasting a second-half profit at least in line with the $23.7m earned in the first half, now says that is unlikely.

The scale of the earnings revisions has produced a dramatic sharemarket backlash. Transfield shares plummeted more than 20 per cent after it released its downgrade.

Since last week's announcements, WorleyParsons' shares have fallen about 19 per cent, UGL's nearly 30 per cent and Coffey's 26 per cent.

The Transfield price fall wiped about $150m from its market capitalisation, taking the loss of market value since February to about $1 billion. WorleyParsons has lost about $1bn of market value in a week and about $2bn since February.

UGL has lost the best part of $500m since it revised guidance and nearly $800m in the past three months, while Coffey's market capitalisation has tumbled from about $115m to about $40m across that period. It is obvious from the earlier declines that the market was expecting their performance to deteriorate and it is also obvious from the response to the confirmations of those declines that the extent of the downgrades was far worse than expected.

The reasons for the downgrades are equally obvious. The contractors are at the sharp end of the abrupt truncation of the resources boom.

Not only has the big pipeline of future projects - several hundred billions of dollars' worth - that was in sight a year ago evaporated, but previously approved projects are being pulled or scaled back and the miners are focusing ferociously on their costs, with contractors obvious and easy targets.

They are losing contracts, the scope of contracts is being reduced and they are being pressured into reducing their margins.

The big pipelines of work and the fat margins available at the height of the investment boom when there was more demand for their services than supply have disappeared at a rate that has taken the contractors and the market aback.

Rio Tinto is talking about reducing costs by $US5bn within two years. BHP Billiton says it has already carved $US1.9bn of annualised costs from its cost base, and Xstrata is dumping projects and warning that much of the Australian coal industry is "under water" and will have to slash costs simply to survive. Little wonder that the contractors are early victims of the intense focus on costs and capital. The only response for the contractors is to do as Transfield is doing and cut its own costs and workforce.


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Transfield said it was bringing forward a previously foreshadowed cost-reduction program, which would produce a further reduction of 113 positions.

Disconcerting for the contractors would be the realisation that there is still an unprecedented amount of mining investment occurring on projects that were committed to and started before commodity prices began diving last year. That investment will peak later this year, then start to subside quite rapidly.

The boom times for the miners, and their contractors, are over.

Stephen Bartholomeusz is a commentator for Business Spectator. For more commentary, visit www.businessspectator.com.au

[greengiraffe]

Miners in for shock after a decade-long boom
BYAUL GARVEY From: The Australian June 13, 2013 12:00AM
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Mining workers make up most of the passengers on a flight from Perth to Newman in Western Australia. Picture: Stephen Cooper Source: The Australian
A DECADE of boom times has created a generation of mineworkers and managers who will struggle to adapt to life in a lower commodity price environment.

Experts and executives say that a new-found intense focus on cost control and a wave of job cuts throughout the mining sector is set to revive many of the practices that were common to the mining industry during the 1990s.

However, the boom conditions of the past 10 years and the likely retirement of so-called old-timers mean companies and their workers could find it difficult to adjust to life with lower commodity prices and thinner operating margins.

Deloitte partner Gary Doran, who heads the firm's restructuring services arm in Western Australia, said the boom times of the past decade had become a new normal for those employed in the resources sector and the downturn would be a "shock to the system".

The changes would be particularly acute among mining contractors who, until the past few years, had historically operated with very small margins.

"There's a lot of younger people in the industry who haven't had to manage a business on tight margins. Traditionally a contracting business is all about managing to a very tight margin, there aren't huge profit margins in it, and the real skilled project managers are those that can manage their shift schedules well, manage their variation orders, and get their quoting right in the first place," Mr Doran said.

"All those practices have slipped because the market has become so fat, and a lot of people don't have the skill set now to do it. That's obvious in the industry."

The mining services industry has been hit particularly hard by the cooling conditions in the resources sector in recent months, with NRW Holdings this week joining the likes of Transfield Services, WorleyParsons, UGL, Boart Longyear and Ausdrill in issuing profit warnings.

Mr Doran said the leadership changes at BHP Billiton and Rio Tinto in recent years gave an indication of the direction and priorities of the big miners.

"If you look at the chairman of BHP, (Jac) Nasser, he's out of the automotive industry. If you look at where (new Rio Tinto chief executive Sam) Walsh came from, he's out of the automotive industry," Mr Doran said.

"The motor vehicle industry about 30 years ago went through their changes and they worked with their suppliers in a collaborative way to find solutions, which brought up all these better practices that have now been implemented around the world."

Alex Koch, a partner and managing director at Boston Consulting Group's Perth-based office, said the sudden shift in priorities within the mining industry away from growth and towards productivity and cost control would require a shift in thinking from workers in the sector.

"There's not many people left in town who were part of the 1990s mining story, which was all about productivity," he said.

"It's the experience of that being normality (that counts). You have to work very hard to get a few percentage point improvement out every year, that is what it takes to be competitive. That was just not a concept that was prioritised for the last decade."

Ernst & Young global mining leader Mike Elliott said the boom conditions and skill shortages of recent years had seen younger workers yet to experience the pain of prolonged downturns promoted into senior positions.

He warned that the staff cuts playing out among many mining companies and contractors could further thin out the ranks of employees with a history of operating in tougher market conditions.

"With the labour shake-out we're going to see as part of this new phase that we're in, then the risk is that companies exit, either voluntarily or involuntarily, a lot of that experience and it won't come back," Mr Elliott said.

"These are guys that can take retirement, or have been through downturns before and know that it's hard work during those times, and will look for an easier lifestyle. It becomes a compounding risk."

While mining companies from BHP Billiton and Rio Tinto down have been publicly stressing their ability to make deep cuts to cost bases in response to the change in market conditions, other executives have questioned how miners managed to lose control of their cost bases in the first place.

BC Iron managing director Morgan Ball told The Australian that he understood how the momentum of the boom could have inspired costly initiatives that look out of place in a weaker market.

"People don't even realise they're complacent. It's much easier for us, we only have 40 employees, 250 contractors and one project, so every day we think about making sure our production's running right and our costs are where they should be," he said.

"That would be more difficult when you're a global goliath."

[mkmk]

http://infopub.sgx.com/FileOpen/Civmec_A...eID=260416

Civmec wins over SGD$210 Million of Contracts since last announcement, Order Book at record levels

The value of the recent contract awards increased the order book to over SGD$330 million and include the following:
• Yandi Sustaining Project for Rio Tinto. The contract is an SMP package comprising supply, fabrication, modular assembly and SMP site works for an iron ore wet processing plant. Work on the contract will commence immediately with mobilisation to site in February 2014 and completion by December 2014. This contract follows the successful award of the civil works contract for this project earlier this year.
• Nammuldi Below Water Table project for Rio Tinto. This package is for the Transfer Pump Station and comprises of civil works, SMP site works and electrical works for non-process infrastructure. Works on this project has already commenced.
• Mungari gold project for La Mancha Resources. Sedgman Ltd, on behalf of the client, awarded Civmec additional contracts for work on the Mungari gold project located in Kalgoorlie. The work relates to the construction of a new gold processing plant. The scope of the contract includes fabrication, assembly and SMP site works. Works have recently commenced and the current scope is expected to be completed in March 2014.
• Scope growth to several existing contracts, including on and offsite work on existing LNG projects.

(Not vested)

[greengiraffe]

I told you so many moons ago - recent results also reflected tough operating conditions for Civmec. Centurion who is supposed to build staff quarters in a mining town in Western Australia can also rethink their plans now...

Fast money ends as the 'For Lease' signs pop up
ANDREW BURRELL THE AUSTRALIAN FEBRUARY 15, 2014 12:00AM

FOR an eerily accurate barometer of the seismic changes being wrought on the Australian economy and its mining industry, take a short stroll through the leafy streets of West Perth.

This is the nation's mining headquarters, but it feels more like a giant billboard for commercial leasing agents, whose names adorn big signs spruiking the availability of oodles of office space, cheaper rents and cut-price parking bays.

Nobody can recall seeing so many "For Lease" signs in West Perth, which houses the small and mid-cap mining companies, engineering firms, geologists and other service industries that fuelled a once-in-a-lifetime boom over the past decade. Another key indicator of the downturn is the sudden availability of street parking, which was almost impossible to find during the peak years of the boom between 2006 and 2012.

West Perth's office vacancy rate soared from 5.2 per cent to a record 12.6 per cent in the past 12 months as companies were forced to cut costs by offloading space, according to Jones Lang LaSalle.

The Property Council of Australia says there is more office space on the market in West Perth than at any time since the late 1990s.

Jones Lang La Salle's agent for West Perth, Mitchell White, says rents on lower-grade properties have plunged by as much as 20 per cent in the past year.

Meanwhile, the rent-free period offered to tenants on five-year leases has risen from four months to 7 1/2 months.

And the vacancy rate could be about to climb even higher in the mining enclave.

One of West Perth's big tenants is mining contractor Forge Group, which moved into a new office building last year around the same time its share price hit a record high of $6.98.

Until this week, when it plunged into administration at the cost of 1400 jobs in Western Australia and Queensland, Forge had been on the lookout for up to 8000sq m of new office space in West Perth or the Perth CBD to bring its expanding workforce under one roof.

Now the administrators will be left to decide what to do with Forge's headquarters in Troode Street, which some observers suggest may be cursed because it previously housed VDM, another contractor that ran into financial strife.

The West Australian Chamber of Commerce and Industry's chief economist, John Nicolaou, says the shake-out is symptomatic of an economy that is changing rapidly -- from undergoing a mining investment boom to a looming production boom.

"It's what happens when businesses try to expand and grow quickly to take advantage of opportunities, but if they don't keep an eye on their cost base as the market starts to get more difficult, it can lead to these sorts of outcomes," he says.

"It's unfortunate but it's a reality of a competitive marketplace -- this is a dynamic economy where the drivers of growth are changing more rapidly than many expected a couple of years ago."

The job losses at Forge came in the same week as Australia's unemployment rate rose to 6 per cent, the highest level in more than a decade. In WA, the jobless rate rose to 5.1 per cent, prompting Premier Colin Barnett to warn of more pain to come.

"I am sorry to see the job losses at Forge," Barnett says. "They are spread across Australia and I would hope that most of those who lost their jobs in this state would be re-employed on new projects or existing projects.

"But certainly the peak construction period has slowed. I remember just two years ago people were predicting a shortage of 200,000 jobs, so this is time to take a reality check."

The leader of Deloitte Access Economics in WA, Matt Judkins, says the state's growth will slow notably in the short term as the record business investment of recent years returns to a more sustainable footing.

"Western Australia's construction boom has been very big, meaning the downside potential is too," he says.

"At the peak of the boom in 2012, a third of all spending in WA's economy was due to business investment in capacity expansion -- mostly new mines and equipment to feed rapid economic growth in Asia.

"It has always been the case that project spending drives the big cycles in WA's economy, and it is no surprise that the transitional shift from construction to production will create a down-tick in short-term growth prospects."

Nicolaou predicts the WA economy will remain in good shape, pointing out 16,000 jobs were created in the state last year, representing 30 per cent of the national total.

This occurred, he says, during a time the state economy "unravelled", sparking a downturn in business and consumer confidence to levels even lower than those recorded during the global financial crisis.

A silver lining is the sudden increased availability of labour, which is bringing down wage costs for businesses and making them more inclined to hire during the coming year.

"At the height of the boom, 75 per cent of businesses found labour to be scarce -- that's now fallen to 10 per cent," Nicolaou says.

"We've had a very heated labour market for some time and if there is a silver lining for businesses, it's that the cost of labour is falling overall. Businesses are now looking to employ in the next 12 months."

As for the mining heartland of West Perth, there is cautious optimism that things can't get too much worse.

White, of Jones Lang LaSalle, says tenants have never had a better opportunity to grab a bargain and the firm has recently been receiving more inquiries about leasing office space.

[greengiraffe]

http://infopub.sgx.com/FileOpen/Investor...eID=297755

Amazing, Civimec still standing relatively tall in the storm...

[sykn]

Hi all, I've just been studying this company with ROE of around 30% the last two FYs, little debt and reasonable price. CAPEX is significant, but not outlandishly high like Midas. Despite the doom and gloom of the declining Aussie mining boom, it seems to be thriving quite well still. Any show stopper to going in now at around 80 cents for value investors? Thanks in advance.

[sykn]

Sorry, I meant 70 cents.