The shares of Spanish Duro Felguera, specialized in industrial services and capital goods fell 20% on Thursday after rising 8% the day before following the international arbitration victory against Samsung. The total amount involved in that litigation case reached 310 million AUD, some 200 million euros, but the company will only receive between 35 and 55 million. Part of this quantity will be destined to the payment of subcontractors.
The firm won the arbitration case it had laid against Samsung C&T in the Singapore Court (SIAC) relating to the execution of guarantees in the Roy Hill Iron Ore mining project in the Pilbara region of Australia. In February 2014 the Korean Group announced its decision to suspend the contract, valued at 1.472 billion AUD (some 961.3 million euros), due to the insolvency of Forge Construction Ltd, a partner of Duro Felguera in the consortium to carry out the project.
The outcome of another claim for 46 M euros (65% capitalisation) which Duro Felguera has brought before the Australian courts still remains unknown. In fact, the Spanish company has brought different claims against Samsung C&T and against the company which was charged with the works Hancock Prospecting as well as its subcontractors.
Banco Sabadell’ s analysts think that the cash which Duro Felguera will amount to 2.8X its capitalisation. They add:
It would reinforce the company in its development of its short term activities, even if it remains unclear how much money will remain available for the company after paying the subcontractors.
Given the complexity of the judgement, Duro Felguera is analysing the reach of the impact in its accounts and treasury, and its is likely that the company will be obliged to revise its 2018 accounts. According to information in the daily Expansion, the most significant impact of the disputed Roy Hill mining project are the pending bills for 75.7 million euros and a provision for 44 million.
Duro Felguera, which last July underwent a financial restructuring process, secured a net profit in 2018 of 61.6 million euros compared to losses of 245.5 million euros the year before.
The group, whose parent company closed the year with negative equity of 24.8 million euros, announced on 28 February that the Board of Directors will present a revised strategic plan at the next Shareholders’ General Assembly as well as measures to reinforce equity.
Despite this victory in the courts, for Banco Sabadell the clarity about the value of the shares remains reduced due to the numerous unpaid projects which it has open (VdO, Venezuela, Gig) and the claims of the tax authorities (the latter for 122 M euros, 1.72X capitalisation).