Maca is an oasis in the mining services desert

With all the gloom about Australia from mining companies cutting back on projects, staff and business, one company, Maca (ASX: MLD), a mining and civil contractor, has grown its revenue and profits organically without buying another company to do it — very remarkable at this point in time.

Full-year results show a 42.1% increase of revenues, up from $334.9 million to $475.9 million. Profits rose just as impressively from $37.7 million to $49.5 million, up 31.3%. The only acquisition it did during the year was to buy the other 40% of the Maca Civil business that it didn’t own already for about $5 million.

The company workforce now numbers over 1,200, and there was no reporting of cutting back or the need to cut back within the annual report.

The company listed on the ASX in 2010 — again, not a great environment for an IPO in commodities-related industries, yet just within the past two years both revenue and profits have almost doubled.

Debt has risen by about three times since 2010, yet plant, property and equipment have risen by four times. Gross gearing is 46% — still manageable. A capital raising of $56.2 million took place for 22 million new shares, diluting earnings per share by 15%. With its substantially higher cash position, the company is now in a positive net debt position.

The question now is how quickly does the company burn cash? With both debt and cash rising, how is the organic generation of earnings? Operating cash flow increased by about $59 million from last year, so money is flowing in. About a third of that is going to buying plant, property and equipment. Free cash flow has been steadily growing, which will alleviate any money squeezes it might have as long as it controls costs.

Other mining services companies like Boart Longyear (ASX: BLY), Monadelphous Group (ASX: MND) and Macmahon Holdings (ASX: MAH) are all doing it tough right now, scaling back and cutting staff because of the mining companies cutting back on projects.

Your first impression of Maca might be that there is something missing from the story to explain the big jump in sales and profit. It may just be that management is so good at what they do that they can control expenses and still keep the contract awards rolling in. This is one aspect of investing you have to read into deeply to find out the experience and reputations of the directors and managers to make a judgement on their skills.

Foolish takeaway

There is always going to be some flower growing in the desert that is completely attuned to its environment, still able to bloom when others shrivel up. When looking at the prospects of a company, always research its industry peers also. It will show why some fail and why some succeed, and it may just lead you to an even better company than the one you started out with.

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Motley Fool contributor Darryl Daté-Shappard does not own shares in any company mentioned. 

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