The Perenti Global Ltd (ASX: PRN) share price is taking a shellacking on the trading floor today. At the time of writing, shares in the diversified mining company are down an astonishing 28.72% to 69.5 cents each.
The Perenti freefall comes after the company downgraded revenue and earnings guidance for the rest of this financial year and into the next.
Let’s take a closer look at today’s update.
Perenti share price plunges
In a statement to the ASX, Perenti Global said it expects revenue and earnings for the second half of this financial year and into FY22 to be lower than anticipated. No specific percentages or figures were provided in terms of the scale of the lower revision.
The company said the reason for its financial difficulties are threefold: the ongoing impacts of COVID-19, a tightening labour market, and a strengthening Aussie dollar. Investors are not taking the news well, judging by today’s Perenti share price sell-off.
Perenti also said today its underground operations will be more significantly impacted by these factors than its surface operations. The company’s investment outlook, while affected by the changing labour market, remains the same as it was in its half-year update.
In its update, Perenti says restrictions resulting from the pandemic have had an adverse impact on productivity. Specifically, quarantining rules, travel restrictions, and an operational shut-down due to an outbreak at a worksite, were all cited as factors dragging on the company’s productivity. Direct costs related to the pandemic, however, were recoverable from clients.
Tighter labour market
Perenti claims it has become apparent to the business that demand for domestic labour is increasing at a faster rate than supply. As a result, wages are increasing and this is affecting the company’s bottom line, according to the statement.
Stronger Aussie dollar
Between its half-year update and today, Perenti says the value of the Australian dollar against the US dollar has increased by an average of 1 cent to 77 US cents. The mining services provider believes this small increase will result in a $1.4 million hit to earnings before interest and taxes (EBIT) per year.
Surprisingly, given the devastation of the Perenti share price today, there were some positive announcements in today’s statement.
Since 31 December 2020, $700 million of contracts have been awarded to Perenti. Furthermore, there is around $320 million worth of letters of intent in the pipeline. Perenti also says it increased the growth pipeline for the business by 20%, mostly related to gold and nickel opportunities in Australia and North America.
Risks to its African surface operations have improved “significantly”, according to the company. It believes there is some potential for the surface business to also improve further from the last estimate.
Finally, Perenti received a $7 million payment from the finalisation of work at one of the African projects. Total funds received from the sale of two African projects has totalled $87 million.
Perenti share price snapshot
Over the past 12 months, the Perenti share price has fallen by around 30% – most of that occurring today. Today’s losses have also resulted in the company’s shares trading almost 50% lower year to date.
Given today’s current market price and 704.3 million shares outstanding, Perenti has a market capitalisation of $496.5 million. Yesterday this was $686.7 million.