Aggreko warns on profit, slower emerging markets

LONDON Fri Oct 19, 2012 5:51am EDT

LONDON (Reuters) - British group Aggreko (AGGK.L), the world's biggest temporary power provider, said 2012 profit would be hit by bad debt provisions and exchange rates, with weakness in emerging markets set to hit growth next year.

Aggreko, which provides generators to cover electricity shortfalls and power major events, reported a 22 percent jump in quarterly revenue on Friday, helped by a 59 million pounds ($95 million) contract for London's Olympic Games.

Chief executive Rupert Soames told Reuters: "We are a little bit more conservative in our view of the growth rates which developing markets are going to deliver next year".

The company said the cost of a new plant in Mozambique, higher bad debt provisions and unfavourable exchange rates - it deals in dollars and reports in sterling - would knock about 2.5 percent off profit and it expected a full-year pretax, pre-amortization profit of 365 million pounds ($589 million).

Analysts had expected profit to rise 15 percent to 377 million pounds, according to a Thomson Reuters I/B/E/S poll.

Aggreko shares, up 14 percent this year and which hit a record high a month ago, were down 7.1 percent to 2,139 pence at 0940 GMT to be the biggest faller among London's leading 350 stocks .FTLC.

Soames said the company had reduced the amount of energy it delivered to two customers in South America and one in Africa who were not paying bills on time, pushing bad debt provision up about $12 million in the third quarter.

Power projects with mines in South Africa have also been postponed because of strikes, he said.

"The bad debt provision which we assumed would reverse in the second half is not now doing so. That is disappointment and then, secondly, the capex guidance for next year is not as positive as we thought and, again, that would be seen as being disappointing," Numis analyst Mike Murphy said.

Aggreko said capital expenditure would fall in the first half of next year to account for the slowdown in developing economies and absorb the fleet built for the London Olympics.

Brokers Espirito Santo, Jefferies and Seymour Pierce maintained their "Buy" rating on the stock, with the former citing Aggreko's "exposure to long-term growth in demand for temporary power".

Aggreko's local business, which rents power and temperature control equipment mainly in mature markets, posted an 11 percent rise in underlying third-quarter revenue, driven by a 13 percent rise in North America.

Its International Power Projects business, which provides temporary power stations mainly to developing countries, saw underlying revenues increase 15 percent, a slowdown from 17 percent in the first half.

($1 = 0.6199 pound)

(Additional reporting by Sarah Young; Editing by Dan Lalor)

(natalie.huet@thomsonreuters.com; +44 20 7542-1272; Reuters Messaging: natalie.huet.thomsonreuters.com@reuters.net)