WorleyParsons Flags Gains Despite Mining Slump

Friday, August 16th, 2013
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Andrew Wood
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Despite the sharp downturn in the Australian mining sector, engineering giant WorleyParsons has flagged gains in earnings throughout all of its operations this financial year.

WorleyParsons chief executive Andrew Wood sees all divisions logging earnings gains during the 2014 financial year, including hydrocarbons, minerals, metals and chemicals, infrastructure and environment and power, even as the Australian resources sector continues to ail.

While Wood made reference to “uncertainties in world markets,” he nonetheless sees the company’s varied portfolio of global projects bringing much needed succour to the company’s bottom line and notes that the company’s upcoming growth strategy will be characterized by organic growth and acquisitions.

Wood also expects a weaker Aussie dollar to help bolster the company’s fortunes in the current fiscal year, given the adverse impact of the once lofty exchange rate on the Australian resources sector.

WorleyParsons’ optimism about the current financial year contrasts sharply with a year-on-year decline in profits of 8.8 per cent in the last fiscal year to $322.1 million, despite a 19.2 per cent leap in revenues to $8.8 billion.

The result was largely consistent with consensus expectations following the company’s profit warning issued in May.

“The result was pretty much as expected,” Morningstar senior analyst Peter Rae told Fairfax. “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.”

Investment in resource infrastructure declined sharply in the key local market of Western Australia last year, while the cancellation of projects in Europe and Canada further hampered performance.

Earnings were also adversely affected by restructuring costs incurred by measures to reduce operations in Western Australia, including staff retrenchments, to deal with the mining downturn.

Analysts point out that these have been one-off costs, however, which are unlikely to recur in the near future and cause further stress on profits.

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