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UPDATE 2-Wood Group shares plummet after warning on engineering profit
December 12, 2013 / 9:11 AM / in 4 years

UPDATE 2-Wood Group shares plummet after warning on engineering profit

(Adds share price, detail, analyst comment)

By Stephen Eisenhammer

LONDON, Dec 12 (Reuters) - British energy services company John Wood Group Plc has warned that profits from its engineering division would be down significantly next year due to weakness in Canada, sending its shares down 12 percent to a 12-month low.

The company was the biggest faller in the FTSE 250 index of mid-sized companies as analysts said they would be cutting their forecasts for 2014, as oil service companies are hit by a reduction in spending at major oil companies where investor pressure has resulted in tighter purse strings.

Wood Group said profits from its engineering division, which carries out early-stage design work mainly on offshore oil rigs and accounts for around half its total profits, would be down by about 15 percent next year.

Peers in the oil services sector to have warned on profit this year include Italy’s Saipem, Norway’s Aker Solutions and Subsea 7.

UK rival Petrofac also recently gave a cautious outlook for the next two years. Its shares were dragged lower by Wood Group’s warning to be down 2.8 percent, making them the top faller in the pan-European FTSEurofirst 300 index in morning trade.

Wood Group said the weaker performance in engineering should be offset by strong results from its services division Wood Group PSN, lifted by buoyant U.S. shale and North Sea markets.

Wood said it expected to meet forecasts for 2013 growth. A Thomson Reuters I/B/E/S poll of analysts found average estimates for 2013 pretax profit of $457 million on revenue of $7.2 billion.

The company also said it expected 2013 core profit (EBITA) from its gas turbine division, GTS, will be lower than the previous year.

“There is no getting around the fact that Wood Group’s ... trading update contains little to provide festive cheer,” David Thomas, analyst at Credit Suisse, said in a note to clients, adding he expected at least a 5 percent cut in consensus forecasts for earnings per share in 2014.

Wood Group had in August lowered its 2013 core profit, or earnings before interest, tax and amortisation (EBITA), guidance for its engineering division to growth of between 10 and 15 percent, from 15 percent, on the back of weakness in Canada’s tar sands market.

Additional reporting by Francesco Canepa; Editing by David Holmes

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