What Happened? NRW Holdings Limited (ASX: NWH) shareholders are waiting for an announcement from the mining services company after newspaper The West Australian reported that the company was in arbitration with project manager Samsung C&T for unpaid work on the Roy Hill iron ore in Western Australia.
What does this mean? The impact to NRW is impossible to know at this early stage. The newspaper report mentions that: "The difference between the two sides' claims is at least tens of millions of dollars."
Regardless of the outcome of the trading halt, the mining services industry is in disarray. After years of controlling terms to the mining companies, the recent plunge in the oil and iron ore price has seen the tide turn and many smaller services groups go out of business.
What happens now? NRW investors will have to sit and wait, but investors in Australia's other large mining services groups that have felt similar pain- like Worleyparsons Limited (ASX: WOR), Downer EDI Limited (ASX: DOW), Monadelphous Group Limited (ASX: MND) and Boart Longyear Ltd. (ASX: BLY) might recommend heading for the exits as soon as possible.
The signs aren't great as NRW reported a net loss of $120.6 million for the six months to end December last year, compared to a net profit of $22.4 million in the same period last financial year. It also reported that it breached its banking covenants in the half and failed to pay a dividend.
My colleague Brendon Lau pointed out that: "NRW will probably still manage to generate free cash flow from its operations even during these challenging times, but the sudden collapse of Forge Group is never far from our minds."
With that in mind….
