Weakening Energy Sector a Factor in Fugro Profit Slide
Following a weak first quarter and due to poorer than expected results during the past months, Fugro says it has decided to disclose preliminary non-audited information on its performance in the first half of 2014. Excerpts as follows:
Fugro expects to report over first half of 2014:
- Low single digit EBIT margin (excluding non-cash impairments). This compares to an EBIT margin of 11.4% in the same period last year, or 10.3% excluding special items1.
- Non-cash impairments in a range of EUR 300-350 million.
Operational performance issues Q2 2014
After the weak first quarter, improvement in results during the past months has been lower than expected mainly for the following reasons.
- The weakening of the oil and gas market, as a result of decelerating growth of capital spending, is resulting in project delays and increased margin pressure in all divisions.
- The Geoscience division is the single largest contributor to the disappointing performance:
- Losses in Seabed Geosolutions continued and are larger than anticipated due to underutilisation in the OBN market segment, and some delays on the mobilisation of two large OBC projects.
- The weakened seismic market is resulting in much lower multi-client sales and consequently will lead to a significantly lower EBIT contribution than in the same period in 2013.
- The improving trend in the Subsea Services division has been marred by two specific issues. The first is an engine room fire on the largest vessel in the fleet that resulted in a total of about 7 weeks of non-compensated down time. The second is an ongoing strike of 3 diving crews in Brazil which has had a 4 week impact in the qua
Paul van Riel, CEO commented: 'The development of the results this year so far has been disappointing. During the last quarter it has become increasingly clear that the oil and gas market has weakened. As a consequence we will take impairments on some of our assets. The weakening of the market, in combination with some project execution issues, has impacted our performance. We are taking necessary measures to improve profitability, guided by our 'Growth through Leadership' strategy. We believe that the long term market fundamentals support our strategy, albeit that the expected growth will be somewhat slower than we originally assumed.'
Fugro adds that the first half-year results will be published, as scheduled, on 11, August 2014.