Aggreko upbeat despite fall in third-quarter revenues
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The Glasgow-based group said underlying revenues for the three months to the end of September were 7 per cent down on a year earlier, with sales at its generator hire business “materially lower” in North America amid the ongoing weakness in the upstream oil and gas sector.
At the firm’s power solutions operation, which builds temporary power stations in emerging economies, reported industrial revenues fell 9 per cent as “difficult trading conditions” in Asia, linked to the decline in the shipping industry, offset growth in Africa and Russia.
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Hide AdUtility revenues at the power solutions arm were 6 per cent lower than last year, but chief executive Chris Weston said the division’s order intake “remains strong” at more than 1,000 megawatts.
He added: “Whilst the environment over the last nine months has been challenging I am pleased… with the progress that we are making on the implementation of our business priorities.
“We are working through the status of our contracts in Argentina and continue to navigate the tough conditions in upstream oil and gas in North America. We expect the 2016 full-year results to be broadly in line with current market expectations, with pre-exceptional profit before tax of around £225 million.”
That figure compares with the £252m pre-tax profit before one-off items that Aggreko reported for 2015.
Although Weston said that the group was reviewing the carrying value of its specialist equipment for the oil and gas market, notably its small gas generators, he added: “I am confident that our continued focus on delivering our priorities is creating a stronger and more resilient group for the future.”
Aggreko expects to spend about £260m on its fleet this year, up from £237m in 2015, with some £150m planned for the first half of 2017.
Analysts at Peel Hunt, which has a “reduce” rating on the stock and a price target of 700p, cut their profit guidance following the figures.
Analyst Andrew Nussey said although “oil price volatility, emerging market uncertainty and unpredictable competitor behaviour” have placed returns under pressure, in the longer term there were signs that management actions could see profitability and returns recover.