Release Date: February 26, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Matrix Composites & Engineering Ltd (ASX:MCE) reported a 47% increase in revenue for the first half of FY25, reaching just under $40 million.
• The company has successfully penetrated the global subsea CapEx market, with secured revenue for FY25 at around $60 million, marking a record year for their surf product line.
• Matrix's advanced materials division is on track for continued growth, contributing to the company's diversification strategy.
• The company ended the half-year in a strong financial position, with cash on hand increasing from $16 million to over $19 million.
• Matrix is well-positioned to capitalize on the growing deepwater investment in the global energy production space, with a strong presence in key markets like Brazil and the Gulf of Mexico.

Negative Points

• There have been delays in customer awards, causing some revenue to be pushed into the next financial year.
• The drilling market has been softer than expected, with discretionary spending on replacements being limited.
• The company faces challenges with project timing, as engineering delays from EPCI contractors have pushed some inquiries down the road.
• The advanced materials division has not seen the expected ramp-up in well construction, particularly in the Middle East.
• Corrosion technology revenue has been down slightly, and project wind-downs in WA and the Northern Territory have impacted growth.

Q & A Highlights

• Warning! GuruFocus has detected 5 Warning Signs with ASX:MCE.

Q: In your outlook statement, you mentioned that the second half group revenue is likely to be similar to the first half. Is there any downside risk implied in that comment? A: There are both upside and downside risks. We need to win some short-term work, but there's enough work out there to potentially increase revenue. It really depends on project timing.

Q: Regarding the outstanding quotations for the surf and drilling market, are there any new quotation additions or removals since the last report? A: There have been very few quotation losses and some additions. The size of some projects means that small engineering delays can push inquiries down the road, affecting order placement timing but not necessarily the delivery timeline.

Q: You're targeting around $10 million per annum in recurring revenue from corrosion technologies and advanced materials. What gives you confidence in delivering that for FY25? A: We expect a modest increase in the second half, driven by demand from the US market and additional capacity in well construction products. We also have a backlog of work in defense and infrastructure products.

Q: Can you provide more details on the $300 million pipeline and its composition over the next few years? A: We expect about two-thirds of that to be delivered across FY26 to FY28. The demand is primarily from projects in Brazil, West Africa, the Gulf of Mexico, and other regions. We are involved in bidding on all of these projects.

Q: With the merger of Sub C7 and SAM, could there be any delays to awards for you? A: The merger is not expected to affect short-term work as they still need to deliver to their customers according to schedule. The merger is at an MOU stage and won't be completed until late 2026 or early 2027.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.