After a year or more of cost cutting, it seems it has become second nature for engineering and construction group WorleyParsons (WOR), judging by its annual meeting yesterday.
Shareholders were told that the company is continuing to chop into its cost base as its customers in the oil and gas business (and other commodities) struggle with low prices.
Chief executive Andrew Wood told shareholders the company expects market conditions for the company’s customers to remain uncertain for at least the remainder of the 2016 financial year, with conditions in the minerals and metals sector to remain depressed.
"We expect trading conditions to remain difficult in the resource infrastructure market as both the hydrocarbons and minerals and metals sectors re-evaluate new project viability in an era of low commodity prices," Mr Wood told the company’s annual general meeting.
"Like our industry peers, we are being impacted by subdued market conditions and we will continue to adjust our business to meet the competitive landscape. To this end, we are continuing to reduce costs.
"We are continuing to flatten the business structure by taking out overhead and consolidating from our current five regions into three regions world wide – being Asia-Pacific, the Americas and Europe Africa and Middle East," Mr Wood said.
But he said the decline in market activity would be partially offset by opportunities in power generation, ports, passenger rail and water.
Investors ignored this optimism and sent the shares down more than 6% to $6.65.
WOR 1Y – Headwinds persist at WorleyParsons
Mr Wood told the meeting that WorleyParsons would continue to reduce costs and improve service delivery as it adjusts for subdued market activity.
It has cut 6,000 jobs since 2013 in order to offset the effects of the downturn in the resources industry and slide in commodity prices, especially the halving in oil and gas prices since the middle of 2014.
The company expects to record redundancy and related costs of $20 million to $30 million in the first half of the current financial year, ending December 31, with offsetting benefits flowing through in the second half.
WorleyParsons is also freezing executive fixed pay for 2015-16, with Mr Wood agreeing to take a 10% pay cut from July this year.
