LONDON Aug 29 Oil, gas and mining-focused
industrial services group Cape Plc pinned its hopes for
an order book revival on two giant Liquefied Natural Gas (LNG)
projects in Australia as it reported "subdued" orders for the
first half of 2013.
Its orders in the half fell to 239 million pounds ($371
million) from 363 million a year earlier, Cape said, blaming
weakness in Asia and Australia and warning that its Asia Pacific
business would be loss-making this year.
It took a 15.6 million pound exceptional charge mainly
connected to reducing the scale of its Australian business.
Costs in Australian LNG development have rocketed, partly
due to high wages and a strong currency, and so have put the
brakes on development there over the past year and hurt
contractors like Cape.
Near-term demand urgency for LNG supplies have also
slackened to some extent because of increasing domestic supply
from unconventional resources in the United States - once seen
as a principle destination for LNG.
Australian mining, where Cape also has exposure, also saw
cutbacks in capital spending programmes last year by companies
such as Rio Tinto and BHP Billiton.
Shares in Cape dropped by more than 10 percent at one point
in morning trade as analysts pencilled in reduced forecasts for
2014 based on the downbeat result for a region that represented
about 20 percent of Cape's business last year.
This was despite the company's reassurance that its 2013
performance would be in line with expectations.
"That's (2014 downgrade) not a stupid thing to have done. I
think given the order book cover we've got for next year, that's
a pretty prudent thing to do. I'm not surprised by it and it's
hard to argue against it," Chief Executive Joe Oatley told
Reuters by telephone.
He said the company's immediate fortunes depend on it being
able to secure work on two major LNG projects in Australia -
Chevron's Wheatstone and Inpex's Ichthys. The
company is bidding on work on both in Australia, where the bulk
of the contract value will be, and in Asia, where modules for
the projects are being built. Wheatstone awards are expecting in
the next couple of months. Ichthys contracts might not be made
until next year.
The British company reported a first half profit before tax
of 4.2 million pounds, down from 9.7 million, and maintained its
dividend at 4.5 pence.