Why the Cimic (ASX:CIM) share price is plunging 16%

The Cimic (ASX:CIM) share price is falling hard today, currently down 16%. We take a look at the company’s full year results.

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Cimic Group Ltd (ASX: CIM) shares fell hard on the opening bell after the company released its financial results for the full year ending 31 December. At the time of writing, the Cimic share price is trading at $21.70, down 16.04%.

What’s driving the Cimic share price lower?

The Cimic share price is taking a dive after the company reported statutory net profit after tax (NPAT) of $620 million for the full 2020 financial year. That compares to a loss of $1.4 billion for the 2019 financial year.

Underlying NPAT came in at $601 million, down from $800 million in FY 2019. This was adjusted for the company’s sale of Thiess, Gorgon, and other one-offs.

The $372 million in proforma underlying NPAT fell from $597 million the previous financial year. This reflects the underlying adjustment for Thiess as a 50% joint venture.

Cimic reported revenue of $11.4 billion, down from $14.7 billion in 2019. The company said that COVID-19 had caused delays in gaining new projects, resulting in lower revenues across both its domestic and international activities.

The construction, mining, services, and engineering company ended 2020 with liquidity of $4.2 billion and a net cash position of $190 million. It reported that it had work on hand of $30.1 billion, or the equivalent to approximately 2 years of revenue.

Comments from the CEO

Addressing the results, Cimic Group CEO, Juan Santamaria said:

While the pandemic had a bearing on revenues and the award of new projects during 2020, we have a strong level of work in hand of $30.1 billion, providing approximately two years’ worth of work and a positive outlook for the future.

The Thiess transaction has delivered additional capital to pursue future growth opportunities and enables us to retain a strategic 50% interest in the mining business, whilst also strengthening our balance sheet and reducing debt.

Santamaria said the company’s strong liquidity and net cash position, supported by the Thiess transaction, enabled it to declare a final dividend of 60 cents per share. That works out to a payout ration of 62% of Cimic’s 2H 2020 NPAT.

Looking ahead, Cimic is targeting healthy profit growth for the 2021 financial year. It offered FY21 NPAT guidance in the range of $400–430 million. Those figures are up 8–16% from the 2020 results.

Cimic share price snapshot

The Cimic share price, like many ASX shares, was hammered during the COVID market panic last year. Cimic shares plunged 63% from 22 January through to their 19 March lows. Since that low, the Cimic share price has rebounded more than 80%.

With today’s intraday loss taken into account, the Cimic share price is down around 12% so far in 2021. By comparison the S&P/ASX 200 Index (ASX: XJO) is up 2.5%.

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Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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