November 30, 2017 / 8:50 AM / a year ago

UPDATE 1-Lamprell cuts profit forecast as East Anglia project bites, shares slump

(Adds forecast details, share movement)

Nov 30 (Reuters) - Oil rig builder Lamprell Plc warned that full-year earnings would be materially below market expectations, hurt by losses from an East Anglia offshore windfarm project, sending its shares down as much as 19 percent on Thursday morning.

The stock recouped most of the losses later and was down 7.1 percent by 0845 GMT. It was the worst performer on the FTSE All Share Oil Equipment & Services Index.

The company received a $225 million contract last year from ScottishPower Renewables for making parts for an offshore wind farm located in the UK waters of southern North Sea.

“There were start-up costs and inefficiencies in relation to the project and the learning curve has proven to be steeper than anticipated,” the United Arab Emirates-based company said in a statement.

Lamprell, which said it was working with its client and the supply chain to mitigate the additional costs, expects 2017 revenue to be in line with current guidance.

The company in September lowered its full-year revenue forecast to come in between $370 million and $390 million, citing low levels of walk-in work. It had previously forecast revenue to be in the lower half of a range of $400 million to $500 million.

Lamprell, which had flagged 2017 as its “toughest year yet”, reported a 19.1 percent fall in 2016 revenue at $705 million.

Like its peers, Lamprell has been cutting costs as oil explorers have slashed spending and cancelled contracts to counter weak oil prices. The company is also expanding into the renewable energy business to bolster its portfolio.

In September, Lamprell reported a jump in its bid pipeline, driven by higher bidding activity in its core markets and new strategic initiatives in the renewable sector.

Chief Executive Christopher McDonald had said then that Lamprell could add about $3 billion a year of potential work in its bid pipeline as a result of the renewable initiative.

However, analysts had cautioned that the push into renewable space posed “higher execution risk” and investment in new strategic initiatives left little scope for further cost savings. (Reporting by Noor Zainab Hussain in Bengaluru; Editing by Saumyadeb Chakrabarty and Gopakumar Warrier)

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