Shares in engineering services group WorleyParsons fell yesterday on a day when the overall market was up 3% because the company had warned of a profit fall for 2010.
It was one of the few outright forecasts for lower earnings for the coming year seen in the current reporting season, and the market didn’t like it.
Not when there’s a Wall Street rebound to emulate.
So the 13.6% rise in 2009 earnings was irrelevant, as were some new contracts the Sydney-based Worley has won in recent months.
The shares fell around 3% to $25.83, or down just over $1.
They had been down as much as $1.60 after the final report and outlook statements were issued.
The company warned it was unlikely to repeat the performance in fiscal 2010, saying it expected a modest fall in earnings.
That means it won’t match the record full-year net income of $390.5 million that it reported yesterday.
“The continuing uncertain market conditions make it unlikely that we can repeat this year’s result in the 2010 financial year,” Chief Executive Officer John Grill said in the statement.
“The effects of extensive project deferrals and delays experience through the second half of 2009 are expected to continue into 2010.”
"Earnings will also be affected by ongoing pressure on margins and the likely negative impact of a higher Australian dollar.
“We expect, therefore, to report a modest decrease in earnings in 2010, with earnings weighted to the second half of the financial year."
He didn’t give a precise figure for the forecast profit level expected.
WorleyParsons joints Boart Longyear, another mining services group, which has warned that it doesn’t expect a “significant pickup” in orders until the end of 2009, with revenue to be around 50% of the 2008 figure. It also said it doesn’t see any sign of improvement until next year.
As well, other mining services groups, such as Macmahon Holdings, have expressed caution about the outlook.
WorleyParsons (WOR) said in June it expected new contracts to support earnings this year. It has won natural gas development projects in Abu Dhabi, a nuclear-energy consulting and engineering contract from the Egyptian government and a clean fuel contract from Saudi Aramco Mobil Refinery Co.
“Despite the backdrop of the particularly challenging global economic environment, we have delivered a good financial performance for the 2009 financial year,” Grill said.
Revenue rose 25% to $5.85 billion, the company said.
It will pay a dividend of 55 cents a share, 47.5 cents for 2008. That makes a total of 93 cents for the year, up from the 85.5 cents paid in 2008.
Unlike other companies recently to have reported and which have cut or omitted dividend, WOR’s board is at least confident that the coming year will generate enough cash to pay dividends at current levels.
The company detailed the outlook for its various businesses, starting with hydrocarbons:
"Our expectation for Hydrocarbons in 2010 is a result similar to that reported in 2009, with expected growth in the Middle East and United States, offset by the anticipated foreign exchange impact of a higher Australian dollar, a decline in earnings in Australia due to the completion of a number of major gas projects, and a rebuilding of demand in the Canadian market."
Power:
"Notwithstanding the likely negative anticipated foreign exchange impact of a higher Australian dollar we would expect growth in earnings in the Power sector in 2010."
Mining and metals:
As confidence continues to grow in the sector on the back of some recovery and stabilization in commodity prices, there is renewed interest and activity in the progression of a number of previously deferred or stalled projects. While the rate of new project development is likely to be subdued in 2010, our early-phase study and feasibility work should ensure we are well positioned when these projects recommence.
"We are also encouraged by the continuing spend in the asset services sector. However, at this stage we expect earnings in this sector for 2010 to be materially below those reported for 2009."
Infrastructure and Environment:
"The outlook for the Infrastructure & Environment sector is improving in 2010. Solid demand in water and wastewater management, desalination, remediation services and carbon advisory services, in conjunction with the nascent recovery in major resource sector projects should result in increased demand for our services. We currently expect an improvement in earnings in this segment in 2010.
