French oil industry engineering and construction group Technip will cut 6,000 jobs and book a 650 million euro ($719 million) restructuring charge as it steps up cost-cutting.
With clients cutting projects due to low oil and gas prices, the company said it targeted cost cuts of 830 million euros ($919.31 million) with 700 million to be delivered in 2016 and the rest in 2017.
“The slowdown in the oil and gas industry is prolonged and harsh,” Chief Executive Thierry Pilenko said in a statement.
“Therefore we have decided to accelerate our cost reduction and efficiency measures – which I know will have tough consequences for employees across the Group,” he added.
CFO Julian Waldron said on a conference call that the restructuring would focus on its underperforming Onshore/Offshore engineering and construction business.
The company would reduce the division’s activities, close offices in unprofitable countries and sell non-essential assets. Its fleet of vessels would also be trimmed back by early next year.
The company cut its profit estimates for the Onshore/Offshore business, which builds oil rigs, refineries and liquefied natural gas (LNG) plants and accounts for more than half its revenue.
It said it now expected adjusted operating profit from the division this year in a range of 210-230 million euros, whereas in April it had expected a result towards the bottom of a range from 250 to 290 million euros.
It said it now expected adjusted operating profit in its subsea division to be around 840 million euros this year whereas previously it had said it expected at the top of a range from 810 to 840 million euros.
The charge would cover all of the costs related to the restructuring, such as severance and asset writedowns, with 80-90 percent to be booked in the second quarter, Waldron said.
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