WorleyParsons bucks mining trend
Engineering company WorleyParsons has flagged a rise in earnings across its divisions this financial year despite continued challenges in the mining services sector in Australia.
WorleyParsons - along with other mining contractors UGL and Coffey - has been hit by a slowdown in Australia's resource sector. It said growth in other parts of the world would help boost its bottom line.
It reported a net profit of $322.1 million for the past financial year, an 8.8 per cent fall from the previous corresponding period. The drop in profit came despite a 19.2 per cent increase in revenue to $8.8 billion.
The result was broadly in line with analysts' expectations and followed WorleyParsons' profit warning in May.
WorleyParsons declared an unfranked final dividend of 51¢ a share, in line with the previous year. The shares closed 3.4 per cent higher at $22.65 on Wednesday, with WorleyParsons among the best performers on the S&P/ASX 200.
"The result was pretty much as expected. The core hydrocarbons business is the key driver of growth, but the significant weakness in mining services, particularly in Australia, dragged down the overall result," Morningstar senior analyst Peter Rae said.
Chief executive Andrew Wood said while there were "uncertainties in world markets", he expected increased earnings for WorleyParsons in this financial year through its diverse global projects.
Some of the challenges the company faced last year included reduced demand for resource infrastructure in the "once buoyant Western Australia market", a project cancellation in Europe and Canada and increased costs in a Brazil project. Earnings were also pulled down by restructuring costs from staff cuts.
Mr Wood flagged improved earnings across all its divisions, including hydrocarbons, minerals, metals and chemicals, infrastructure and environment, and power for the 2014 financial year, and added organic growth and acquisitions would be part of the company's growth strategy.
Mr Rae said it was too early to call an end to the decline in mining services and he expected the sector to remain challenging this financial year.
"From WorleyParsons' perspective, they've downsized in WA to compensate. They had a number of costs in their downsizing operations and we won't hopefully see those repeated next year, which will help them there," he said.
Mr Wood added in an earnings call that as the LNG projects in the northern parts of Australia moved towards their final construction and delivery phases, there would be less engineering activity, affecting engineering companies.
"I think we're staying engaged with that market and we see potential opportunities there. But on balance, we see the Australian hydrocarbons sector for us ... potentially softening," Mr Wood said.