Mining services companies can be risky ventures. Over the last few years quite a few have met an untimely demise. RCR Tomlinson’s 100 year history came to a sorry end in 2018. Others that no longer grace the ASX boards include Titan Energy Services and Forge Group. One that flirted with disaster in 2015 but has since gone from strength to strength is NRW Holdings (ASX:NWH).

In 2015 NRW recorded a loss of $230 million. This was due to a major slowdown across the resources sector along with one particularly ill-fated project. Samsung C&T had sub-contracted NRW to work on the Roy Hill Rail project, part of Gina Reinhart’s Roy Hill iron ore project in the Pilbara, WA. This was Samsung C&T’s first mining construction project and they ended up losing about $1 billion on it. Many of the sub-contractors also suffered large losses, including NRW who booked an impairment charge of $157m. By February 2016 the share price had fallen as low as 5 cents, with the market capitalisation having plummeted from over $1 billion four years prior to about $14 million.

Those who had great foresight and a strong stomach in early 2016 would now be sitting on gains of about 50 times.

The company rebounded to profitability in 2016 and those profits grew every year until 2021. 2021 was a tough year for NRW with the pandemic induced border closures leading to chronic shortages of staff, making it very difficult for NRW to fulfil their contract obligations. Profits rebounded to a good level in 2022 and are forecast to continue growing for at least the next two years. In 2022 profits reached almost 100 million, more than six times the entire market capitalisation six years prior.

NWR have now expanded from focusing purely on mining services to also include infrastructure and urban construction in their portfolio. The nature of most of their revenue is project based. The risk with projects is that they are usually costed on fairly tight margins. NRW generally operates on single digit margins. As many projects run for multiple years a lot of unforeseen things can occur. It does not take a lot for costs to blow out and for the project to suddenly be operating at a loss.

These risks were highlighted again in 2019 as they had to write-off costs on the Gascoyne…

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