New and Extended Contract Awards Rise Sharply

The massive scale and complexity of the mining and energy construction projects undertaken in the past decade generated a robust tendering pipeline, with numerous medium- to large-scale contracts available based on price, capability, reputation, and reliability. This facilitated Monadelphous developing into a major provider of engineering construction and maintenance services in the domestic iron ore, energy, and coal markets. Each year, the company has taken on larger engineering construction projects, mainly competing for AUD 5 million-AUD 100 million contracts typically lasting one to two years, but now tendering for midsize to large projects valued at more than AUD 100 million. Engineering construction contracts undertaken are traditionally 66% schedule-of-rates-based and 34% fixed-price schedule, which allows the company to balance risk and margins. Monadelphous predominantly tenders for industrial maintenance contracts in the AUD 10 million-50 million per year range, with contract duration of two to three years. The maintenance contract work is undertaken on a rates-reimbursable basis, with a high level of renewal because of the implicit switching costs for customers.