What Happened? Shares in mining services company Macmahon Holdings Limited (ASX: MAH) surged 16% on Friday after the company announced that it will receive $19 million to settle a dispute over a contract termination with Cobar Management.
Macmahon will book a $16 million profit from the settlement and repay debt with the proceeds.
So What? The settlement was a nice ending to a terrible month for Macmahon after the company announced a $112 million loss in the half year to December and cut its revenue forecast by 25% after losing its largest mining project, a $260 million per year contract at Fortescue Metals Group Limited's (ASX: FMG) Christmas Creek project in the Pilbara.
The problem is that the settlement is unlikely to materially change the difficult conditions facing the company and industry.
What Now? Macmahon and competitors like Ausdrill Limited (ASX: ASL), Maca Ltd (ASX: MLD), Bradken Limited (ASX: BKN), and Downer EDI Limited (ASX: DOW) are struggling in an Australian economy feeling the pinch from lower global commodity prices.
The worst part for investors in these companies is that generally their share prices have floundered at a time when the Australian share market has outperformed most developed peers.
If we were to see a decent correction in the near term, investors could lose more than their shirts!
