Last week, the share market rose as a new financial year got underway. The S&P/ASX 200 (ASX: XJO) was up 2.6% over the week to finish at 6057.9 on Friday. This represented a three week high. Gains were largely led by the technology sector, with the S&P/ASX All Technology Index (ASX: XTX) up 6.3% over the week. This following the NASDAQ which gained 3.6% last week. The All Technology Index has now risen more than 90% from its March low, while the ASX 200 is up a comparably meagre 33%.
Many share price gains are being driven by better than expected economic data. The American labour market added 4.8 million new jobs in June. This brought the country's unemployment rate down to 11.1% from 13.3% in May. Optimism that the worst of the economic impacts of coronavirus is behind us was renewed. But some companies are still seeing economic pain. On that note, let's take a look at last week's worst performing shares.
Worst performing ASX shares of the week
Adbri Ltd (ASX: ABC)
The Adbri share price plummeted 26.1% last week to close at $2.35 per share. The fall was following the company's announcement that a contract with would not be renewed, ending an almost 50-year partnership. Adbri subsidiary, Cockburn Cement, lost its contract to supply lime to Alcoa, with the latter choosing not to renew the contract which expires in June 2021. Adbri is one of Australia's leading construction materials producers, supplying cement, lime, concrete, and concrete products to the building industry since 1882.
The Alcoa contract is worth some $70 million in annual revenue to Adbri, so the non-renewal will have a material impact on the company's revenue post-June 2021. Adbri CEO Nick Miller said, "we are disappointed with Alcoa's decision to displace locally manufactured product with imports from multiple sources, particularly considering our almost 50-year uninterrupted supply relationship". Adbri will now need to evaluate the full financial implications of the loss and take the necessary mitigating actions.
Perenti Global Ltd (ASX: PRN)
The Perenti share price lost 8.3% last week to close Friday's trade at $1.10. The mining services group has operations spanning 13 countries and offers both surface and underground mining solutions. Perenti recently reported that the impacts of COVID-19 on the performance of its projects to date has been limited. The Savannah Nickel Mine was suspended and a number of mine sites operated by Perenti in Egypt, Burkina Faso, and Senegal experienced temporary, short-term shutdowns.
Capital and liquidity management has been a primary focus of the company under its 2025 Group strategy. On 15 June, Perenti announced it had strengthened its liquidity position by increasing the size of its revolving credit facility by $130 million. The company withdrew its guidance in March due to uncertainty, but recently confirmed it expects FY20 underlying NPAT(A) to be in the range of $106 million to $110 million.
Southern Cross Media Group Ltd (ASX: SXL)
The Southern Cross Media share price declined 7.9% last week to close at 17.5 cents on Friday. The radio operator has suffered greatly since the onset of coronavirus, which has further deteriorated already fragile advertising markets. Last week, Southern Cross announced it had been found eligible for funding of approximately $10 million under the Commonwealth Government's Public Interest News Gathering program. The grant to regional media businesses will be deployed over the 12 months from 1 July 2020.
Southern Cross was eligible for funding under both the regional radio and regional television streams thanks to its 78 regional radio stations and network of regional television licenses. CEO Grant Blackley welcomed the funding, saying, "regional communities and businesses have been hit hard by COVID-19. As Australia's largest regional media business, SCA is no exception. The funding will assist SCA's network of radio and television stations continue to keep 8.8m Australians and their local communities in regional Australia informed…"
Reliance Worldwide Corporation Ltd (ASX: RWC)
The Reliance Worldwide share price fell 6.2% last week to end Friday's trade at $2.87. Reliance supplies plumbing, heating, and smart home solutions for residences and specialist industries. Last week, substantial shareholder Bennelong Australian Equity Partners Ltd reduced its holding in Reliance by selling 41,005,112 shares on market. This reduced Bennelong's voting power from 15.66% to 10.32%. In June, Paradice Investment Management Pty Ltd also reduced its holding in the company, with voting power declining to 5.97% from 7.08%.
Reliance scaled back manufacturing operations in Australia to 4 days per week as a result of the coronavirus pandemic. With economic forecasts predicting a decline in new housing construction over the next year, a decline in demand for Reliance's products is to be expected. Approximately 50% of Reliance's sales in Australia are to the residential new construction end market. In the United Kingdom, approximately 40% of workers were placed on furlough in April, with activity in the UK and Continental Europe subdued. Aggregate demand in EMEA is currently running at 35% to 40% of pre-COVID levels.
NRW Holdings Limited (ASX: NWH)
The NRW Holdings share price dropped 6.1% to finish last week at $1.77. Another mining contractor on the list, NRW Holdings provides diversified services to the mining, energy, infrastructure and urban development sectors. In May, NRW Holdings advised it was on track to achieve its revenue guidance of $2 billion for FY20. Thanks to the continued strong performance of the business, NRW also resolved to pay the interim dividend of 2.5 cents per share that had previously been deferred.
In the 10 months to April 2020, the company reported record revenue of $1.6 billion. It also recorded a significant improvement in net debt (cash less interest bearing debt) which reached $115 million. NRW Holdings was owed $32.7 million by Gascoyne Resources Limited when the latter went into voluntary administration. Under a recapitalisation plan for Gascoyne, NRW could achieve a potential 100% return of this amount via an upfront cash payment, the issue of equity, and a contingent payment linked to ounces of gold produced and the gold price.
