What: Shares of Bradken Limited (ASX: BKN) have been slammed today after the mining services group said it would not pay an interim dividend – an announcement which coincided with a massive 64% decline in underlying net profit after tax (NPAT) to just $13.8 million.
The stock fell a shattering 25.1% to a near six-year low at just $2.36. Prior to today, the stock had traded between $2.59 and $5.30 over the last 52-weeks.
So What: The writing has been on the wall for the mining services sector for a long time. The mining boom has been in a steady decline and, in an effort to save costs and maximise efficiencies, most miners have moved their mining services in-house, thus creating heavy structural headwinds for companies such as Bradken, Monadelphous Group Limited (ASX: MND) and Worleyparsons Limited (ASX: WOR).
This was well and truly reflected in Bradken's half-year report today. The company said: "Ongoing volatility in a number of commodity and mineral markets to which Bradken is exposed, continued to persist in the first half." This resulted in a 12% decline in sales revenue and a 75% decline in operating cash flow. Meanwhile, the restructuring costs to date were $47.1 million, while the related plant and equipment impairment was $51.1 million.
The stock's heavy fall has likely been exacerbated by Bradken's decision to not pay a dividend. While the company said the decision was made to improve its flexibility as it completes a transition to become more competitive, it also highlights the financial difficulties facing the company and sector as a whole right now.
Luckily, while Bradken has scrapped its dividend, there are plenty of other great dividend stocks you can buy right now!
