WorleyParsons Awarded A Four-Year PMC Contract For The New Assiut Hydrocracking Complex

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On 8 October 2018, WorleyParsons Limited (ASX: WOR) announced that it has been awarded a four?year project management consultancy (PMC) contract for the new Assiut Hydrocracking Complex (AHC Project) in Egypt, by Assiut Oil Refining Company (ANOPC). Despite this news, the share price of the company declined by 1.274 percent as on 8 October 2018.

The contract is a part of the upgrade of the refining capacity and efficiency in Upper Egypt and under the contract, the company oversee the basic engineering phase, open book estimates, detailed design, construction, procurement and commissioning of the AHC project. It is estimated that the new complex will process the conversion of 2.5 million tonnes per year of heavy fuel oil into high-quality petroleum products such as diesel, liquefied petroleum gas, kerosene, naphtha, and gasoline.

In FY 2018, due to UK acquisition, the aggregate revenue of the company grew by more than 8.5% to $4,749.2 million compared to last year. Cost reductions in the company gave operating leverage due to which the underlying NPAT of the company grew by 39.1% to $171.4 million. The underlying EBIT margin on aggregated revenue for the Group increased to 6.3% in FY 2018 compared with 5.9% in 2017. The operating cash flow of the company increased from $78.9 million in FY 2017 to $259.7 million in FY 2018. The net debt of the company reduced to $662.5 million. The return on equity increased from 5.5% in FY 2017 to 6.8% in FY 2018. Due to the improved operating and cash performance of the company coupled with improving market expectations, the Board declared a final dividend payment of 15.0 cents per fully paid ordinary share, unfranked which is in addition to the interim dividend of 10.0 cents per share for a total dividend of 25.0 cents per share for the full year. As a result, 39.9 percent of the full year underlying net profit after tax for FY2018 will be distributed to shareholders as a dividend.  

The strategic acquisition of UK Integrated Solutions business fast-tracked the company’s strategy of building a world-class global MMO capability and gave it a robust entry into the UK North Sea market. The company also accelerated its entry into the European chemicals market through a smaller acquisition of the M+W Group’s chemicals engineering business in Germany. Some of the key successes within the past 12 months include an improved 36-month backlog figure from $5.1billion to $6.4billion, an improvement in operating margin percentage and other key operational metrics such as overhead ratios, gearing, and leverage.

Due to the continuous improvement in market conditions, the company’s resources and energy customers are increasing early phase activity for the next cycle of investment. It is reflected in the recent level of contract awards and growing backlog. By maintaining the focus and growing position in the resources and energy markets the company is expecting to deliver improved earnings in FY2019. The Company is now focused on ensuring that the operational efficiencies gained in the past 24 months remain within the business and it will be achieved through “Sustaining Performance” management program which focuses on a range of key business performance metrics. At the group level, key operating metrics such as staff utilization and backlog remain strong.

In the past six months, the share price of the company increased by 45.68% from $14.010 to $20.410 as on 5 October 2018 and traded close to a PE level of 87.60x. WOR’s share traded at $20.150 with a market capitalization of circa $5.57 billion as on 8 October 2018 (AEST 3:44 PM).

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Kunal Sawhney
Kunal Sawhney is founder & CEO at Kalkine and is a richly experienced and accomplished financial professional with a wealth of knowledge in the Australian Equities Market. Kunal obtained a Master of Business Administration degree from University of Technology, Sydney. He has an extensive expertise in quantitative and qualitative stock selection practices, and he proficiently navigates on equity related matters while enabling them achieve success in complex market conditions. Kunal features as a guest speaker at various equity research platforms and news channels on a regular basis, sharing his valuable insights on the subject. His firm provides holistic view of stock investment recommendations to retail investors with respect to financial performance, strategy, and industry catalysts. The firm looks for stocks that are out of favour with the market and a combination of tangible and intangible aspects is used for stock picking with a great focus on income and growth portfolios. Kunal is featured regularly on Sky Business, CNBC and Australian Financial Review

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