Bouncing back from Covid stronger than ever, Australian engineering, construction and remediation contractor Duratec Limited (ASX: DUR) has been awarded a $100 million contract with the Australian Department of Defence to undertake wharf and harbour basin maritime upgrade works.
The Company will start working on the project immediately, and commencement on-site is scheduled for May 2023. Duratec expects the project to be completed by March 2025.
Duratec suffered a Covid lull in FY21 and the first half of FY22. Its revenue fell by 4.7% in FY21 to $235.7 million, then recovered slowly in FY22 to $310 million with an EBITDA of $19.3 million. Now, with contracts like these, it is all set to make a significant financial comeback.
Duratec’s Managing Director, Phil Harcourt, commented, “We are excited to have been awarded this contract, which further highlights the Company’s ability to deliver projects of scale within the Defence sector. Duratec has an experienced and well-prepared team capable of delivering this challenging project with certainty and timeliness while maintaining the highest level of quality.”
Headquartered in Wangara, Western Australia, the Company’s purpose, essentially, is to revive corrosion-afflicted structures. This way, it lengthens the lifespan of different constructions, be it steel or other materials. Duratec has fifteen branches around the country in capital cities and regional centres. It delivers services across multiple sectors, including Defence, Commercial Buildings & Facades, Infrastructure (Water, Transport & Marine), Mining & Industrial, Power and Energy.
Last year, between April and June 2022, the Company secured $25 million worth of multiple Department of Defence contracts, including contracts from the Australian Defence Force Academy (ACT) worth $11 million and Russell Offices worth $6.5 million, among others. Additionally, it received an $18.4 million fuel infrastructure contract at RAAF Base Richmond in New South Wales.
The latest $100 million DoD contract further validates Duratec’s strategy of having multiple large-scale, longer-duration projects while maintaining a diverse mix of smaller, shorter-duration works. While doing so, it also keeps expanding its client base. For instance, just last month, it secured a $48 million contract with BHP WA Iron Ore for wharf structural remediation works, expected to be completed by Feb 2025.
The $100 million project aligns with Duratec’s focus on securing marine infrastructure projects throughout the country while strategically investing in Northern Australia.
In light of the new contracts, in FY23, the Company expects its revenue to be around $420 million to $460 million, with EBITDA expected to reach $32 million to $35 million. These figures represent significant increases from Duratec’s FY21 and FY22 financial reports. It also signifies that Duratec has moved on from its Covid days and has remediated its optimism.
Its FY23 forecasts include an 8-month contribution from its recent $18 million acquisition of Wilson’s Pipe Fabrication business.
The DoD contract includes termination provisions standard for this type of agreement. The award supports Duratec’s strong order book of $530 million and $593 million in tendered works and an overall pipeline of tangible opportunities worth $1.84 billion.
Alinda is a Business Reporter for The Sentiment
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