Aggreko has bore the brunt of some “challenging trading” due to the dip in oil and gas, its chief executive said today.
Chris Weston said: “Whilst the trading environment over the last twelve months has been challenging I am pleased with the progress that we are making across the Group implementing our transformation programme to return the business to growth. We are investing in the right technologies to reduce costs to our customers; improving our customer focus and delivering the efficiencies we set out in August 2015.
“These improvements, taken with our market leadership, technical capability and the need for our products being as relevant as ever mean I am confident we are well on track to create a stronger business for the future.”
Its operating profit fell 20% year-on-year from £249million to £199million.
North America’s revenue was down 18% driven by the low oil price.
The report read: “Revenue in our North American business excluding currency was down 18%. The decline that affected us from quarter two 2015 in upstream oil and gas continued through 2016 in the shale basins, offshore Gulf of Mexico and the Canadian Oil Sands. We continue to service all these markets and see an ongoing market opportunity especially if the oil price stabilises at current relatively higher levels.
“The team continue to identify opportunities to balance utilisation and pricing in this changing environment, however the utilisation of the specialist equipment that we use in the shale basins remains at sub-optimal levels. As a result we have reviewed the carrying value of these small gas generators and have taken an impairment charge of £30 million (more details are included in the Financial Review on page 14). In addition, we have taken the recent decision to close three depots and further reduce headcount to right size our oil and gas cost base which will generate savings of £2.5 million. Our petrochemical and refining sector also had a weak year with revenues declining 18%, following a strong year of 25% growth in 2015.”
It also shouldered an impairment charge of £30million relating to small gas generators.
Mr Weston added: “We expect to see growth across the group in 2017, augmented by incremental annualised cost savings of £25 million from the second half. However, this will be more than offset by the significant impact of Argentina and as a result we expect full year profit before tax and pre-exceptional items to be lower than last year.”
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