Shares of McAleese Ltd (ASX: MCS) have fallen dramatically this morning after the transport group emerged from an extended suspension from trading. The stock fell by as much as 46.9% to a low of 8.5 cents early in the session.
What happened?
McAleese's shares have been suspended from trading since 13 April after Atlas Iron Limited (ASX: AGO) announced the closure of its Pilbara mines in response to tumbling iron ore prices. Atlas Iron is one of McAleese's major customers and the closure of its mines was expected to have a material impact on the transport group's overall earnings.
Those fears were confirmed this morning after McAleese provided a revised outlook. In the market sensitive announcement, McAleese told investors to expect earnings to be $70 million at the EBITDA (earnings before interest, tax, depreciation and amortisation) level, which is down from previous guidance of between $85 and $90 million that was provided in February.
At the same time, it also said its net debt would be between $160 and $165 million – up from guidance of $145 to $150 million – which includes the impact of asset sales worth roughly $10 million before the end of the year.
What happens now?
McAleese has confirmed that it will restart haulage services for two of Atlas Iron's three iron ore mines located in the Pilbara although the commercial terms of the arrangement are yet to be finalised. However, the company will be forced to take a number of financial impairments on its various business divisions.
Although some investors might find McAleese attractive at today's price, it maintains a high level of debt and its heavy reliance on Atlas Iron makes it seem a very risky bet, and one that 'Foolish' investors would be wise to give a miss.