Mining contractor NRW Holdings (ASX: NWH) on Thursday reported FY13 results. Revenue hit a new record, up 1% to $1.374 billion, while earnings and net profit after tax fell 22% and 24% respectively.
Of the company's four divisions, civil and action drill and blast reported strong growth, while the mining and action mining services divisions struggled. As a result, the company reduced its final dividend by 50% to 5 cents. This takes the full year dividend to 13 cents, representing a yield of around 11%, fully franked.
The civil division reported a record revenue of $860.6 million, up 18%, as it completed a number of project milestones and attained a new contract at the Roy Hill Iron Ore mine. The action drill and blast division reported record revenue of $150.5 million, up 33%, and was awarded two multi-year projects. The two divisions contributed 69% of revenue.
The two poorly performing divisions, mining and action mining services, registered a 25% and 10% drop in revenue respectively due to a number of key contract terminations and adverse weather conditions restricting mine production volumes. The divisions accounted for 29% and 2% of revenue respectively.
NRW gave a relatively upbeat outlook for FY14. Cost cutting measures are expected to boost profitability and a strong order book in excess of $1 billion is expected to deliver revenue between $1 and $1.2 billion.
Of slight concern is the company's exposure to the coal and iron ore construction industries, which are experiencing a structural slowdown due to the expectations that prices will decrease in the near future. NRW reported that it is attempting to expand into new markets such as LNG and CSG.
Foolish takeaway
NRW has produced solid results in a difficult environment for mining contractors. While revenue was above the previous year's result, earnings and net profit suffered big declines, as did the dividend payout. NRW is focussing its efforts in FY14 on new tenders and diversifying out of coal and iron ore by spreading into the LNG and CSG sectors. Investors with a high risk tolerance and interested in a high yielding company with reasonable prospects for FY14 may be interested in a small stake in NRW.
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Motley Fool contributor Andrew Mudie does not own shares in any of the companies mentioned in this article.
