Shares in global consulting engineer WorleyParsons slumped to post-GFC lows on Wednesday, following a severe profit downgrade - just weeks after it told shareholders it was upbeat on its prospects for the year ahead.
The warning by the one-time market darling triggered selling across the engineering services sector, with stocks from UGL to Monadelphous sold amid deepening gloom over a lacklustre recovery for the sector as mining and gas capital spending slows.
Pressure from these cutbacks forced Worley to slash its outlook just six weeks after it told shareholders at the annual meeting that earnings would rise this financial year.
Now, it says the half-year net profit will run from $90 million to $110 million, which will drag the full-year down to $260 million to $300 million, as it pins its hopes on a rebound in the June half to make its forecast.
This is well short of the recent forecast that earnings would beat last year's $322 million net profit.
WorleyParsons shares slumped 26 per cent to $16 - the lowest since early 2009. "You deliver bad news, you expect to get punished," Worley chief executive Andrew Wood said of the sell-off.
The profit warning triggered carnage across the sector, with Monadelphous down 5.3 per cent at $17.01, and UGL falling 3 per cent to $6.84.
WorleyParsons blamed a "delay in [the] upturn in our markets" that only became fully apparent after a "bottom-up review" at the end of the September quarter.
Growth in the US, Europe and southern Africa will not be enough to offset the downturn in Australia and Canada, despite cost-cutting.
In the Middle East, project delays have resulted in a slow start to the year, while the Latin American market has been hurt by the downturn in minerals and metals markets.
In Australia and Canada, it blamed the slow start-up of work on new contracts for the December-half downturn. "After a very high period of activity, it's come down, and we're waiting for the next phase to kick in," Mr Wood said.
The fall in Australia "had been anticipated", he said, but the problem was a "slower ramp-up in developments". The group is confident of a sharp rebound in the June half, which is traditionally stronger.
"Confidence is likely to be significantly eroded given the magnitude of the downgrade and the far from exacting or detailed reasons given for the decline," said Shaw Stockbroking analyst Danny Younis.
The steep profit downturn compares poorly with the September quarter performance of two global competitors, Foster Wheeler and KBR.