Engineering contractor and consultant WorleyParsons (WOR) confirmed an operating loss after another round of impairment losses for the year to June 30, and held out the gloomy prospect of 12 more months at least of financial pain and strain from the tanking global oil and gas sector.
And yet the glum outlook was ignored by investors in yesterday’s skittish market and WorleyParsons shares ended up 2% at $7.
In fact WorleyParsons warned investors that its markets have “deteriorated” since May, holding out the very real prospect of another round of write-downs and job losses if conditions don’t improve (global oil prices are down more than 30% since June30).
The company reported annual loss of $54.9 million for the June 30 year, thanks to those foreshadowed impairments and other losses of close to $200 million. The company earned $249 million for 2013-14.
Underlying profit plunged 25% to $198.6 million, and as a result of that and the very poor outlook, directors more than halved the final dividend to 22 cents from the 51 cents paid a year ago.
That’s understandable after the warning yesterday on top of axing 4,200 jobs worldwide in the year to June and closing nine of its offices.
WorleyParsons said it saw little prospect of a rebound in oil-and-gas investment.
“Trading conditions are expected 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,” CEO Andrew Wood said in the statement with yesterday’s profit release. He added that the slowdown had deepened in recent months.
WOR 1Y – Trading ‘conditions difficult’ for WorleyParsons
The company said cost-cutting would ease the impact of the resources downturn on hydrocarbon earnings, but warned conditions in minerals and metals remained “depressed" and the infrastructure market remained "difficult" as customers re-evaluated projects.
“The further deterioration in our markets since May has resulted in us taking further action beyond those previously announced,” Mr Wood said yesterday.
WorleyParsons did not give any financial forecasts for 2016, saying only that it remained focused on improving the delivery of services to its customers, taking costs out of the business and improving returns to shareholders as it adjusts to "subdued market activity”.
Directors warned in May that it would take $125 million in pretax charges in fiscal 2015, including $70 million to settle a dispute with ExxonMobil over an offshore drilling platform it designed in Russia, redundancy costs of $20 million and “onerous lease” costs of $25 million.
The question now for shareholders is if the worsening in the company’s key market since balance date will force more cuts at year’s end.
