Follow On Contract with BP Underpins Saunders’ Position in Australian Oil & Gas Industry

Summary

• Saunders draws on over 60-years’ experience in the oil & gas sector.
• SND services the sector ranging from upstream production, refining, and storage & distribution of refined products in downstream.
• Its services include terminals for import & distribution, crude & refined product storage, and associated structural, civil, mechanical & piping works.
• Saunders has reported project wins worth $ 90 million in FY20-H2 and has a record order book in excess of $ 107 million.

Provider of a range of reliable, innovative, and cost-effective solutions, with trouble-free project delivery, Saunders International Limited (ASX:SND) has been aiding the development of Australian industries since 1951. Its sustained growth has enabled SND to emerge as a respectable, multi-disciplinary entity, catering to a wide range of clientsin the industrial and infrastructure sectors.

Speaking of Saunders’ diverse client base, that has expanded to include a combination of industries such as mining companies and water utilities, the Company is still working closely with many of the original oil majors including Mobil, BP, Shell and Caltex since the 1960s.

In this backdrop, we update you that Saunders has provided another example of its lucrative position as a leading maintenance service provider to the oil & gas industry in Australia, as the Company has been awarded a follow on contract by BP.

This update has garnered ample market and media attention. So much so, SND inched upward by 11.62% on the ASX and quoted $ 0.48 on 23 June 2020, after the market update was released.

Let us get acquainted with the contract details-

Saunders-BP Tank Overhaul Works Contract

SND has bagged the mechanical refurbishment and upgrade of two further tanks for BP at its Bulwer Island site. The contract is worth nearly $12 million wherein Saunders will be adhering to mechanical refurbishment, cleaning, protective coating, and civil services works for the two tanks.

The contract is a follow on to the Company’s works for BP’s Bulwer Full Fuels Project, which comprises of refurbishment of three tanks and two separate piping projects.

Saunders believes that the contract will contribute revenue from FY21-H1 through to FY22. Moreover, it increases the Company’s new wins in FY20-H2 to more than $ 90 million.

Now that we have mentioned Saunders’ new wins, let us cast an eye on few of them-

Saunders’ Latest Contract Wins

Saunders swears by Innovation, Excellence and Growth while providing solutions to the bulk liquid storage, industrial, energy, defence, resources, and road and rail infrastructure sectors.

At the back of combined knowledge and experience gained over an extensive portfolio of projects, the Company has naturally transitioned to the delivery of larger and more complex solutions for its clients, including terminal expansions, engineering, procurement, construction, management, and remediation projects.

Record orderbook (in excess of $107 million) and strengthening pipeline of new opportunities underpin the future growth for Saunders.

Few contract wins bagged this year are-

• Design and construction contract for a new 60ML water reservoir for Sydney Water in Liverpool, NSW, valued at nearly $ 15 million
• Stage 1 Precipitation Tank Repair contract for Rio Tinto’s Yarwun alumina refinery near Gladstone, Queensland, valued at over $ 30 million
• Contracts in the defence sector, combined value of the projects (in NSW and Northern Territory) estimated at around $ 12 million
• Design and construction contract for three tanks as part of the Sydney B4A Terminal Expansion project at Port Botany, worth approximately $20 million

ALSO READ- Comprehensive Services of Multi-Disciplined Engineering and Construction Firm, Saunders International

Additional Updates: COVID-19 Situation, Revised Guidance

Amid COVID-19, Saunders reported reduced productivity across some sites due to the increased requirements to abide by social distancing guidelines. There was a delay in receipt of material, owing to disruption in the Company’s international supply chain due to impacts of freight channels, coupled with other logistic constraints. Moreover, interstate travel restrictions thwarted specialist project personnel from attending certain sites.

However, Saunders remains focused on cash preservation via reduced discretionary operating expenditureand capex. Additionally, there have been no confirmed cases of COVID-19 at the Company (as per the last update on 26 May 2020).

SND has revised guidance for the financial year 2020 with revenue expected in the range of circa $ 66 million to $ 70 million and EBIT margin projected between 1.8% and 2.3%. Target budget for FY21 is $ 100 million and, for the same period, EBIT margin is projected to be circa 3.75% - 4.75%.

At the back of new project wins, vigilance towards the pandemic and Board’s objective to resume fully franked dividend payments in FY21, Saunders seems to be well maintaining its position as an efficient contributor to the development of Australian industries.

GOOD READ- Casting Eye on Saunders International’s Vision, Values & Capabilities

(Please note that currency mentioned is in AUD, unless otherwise specified)