A downgraded profit forecast from mining services firm WorleyParsons has wiped more than $1 billion from the company’s market value.
WorleyParsons on Wednesday said it expected underlying net profit in the 2013/14 financial year to be in the range of $260 million to $300 million.
That compares to a forecast just six weeks ago of increased earnings on its 2012/13 net profit of $322 million. WorleyParsons shares dropped $5.59, or 25.9 per cent, to $16.00, shrinking its market value by $1.36 billion.
The company provides engineering and consulting services to the resources and energy sectors.
It said the revised outlook reflected reduced revenue from professional services, particularly in its large Australian and Canadian businesses.
It also reflected the implementation of a cost reduction program across the group, the benefits of which will begin to be realised in the second half of 2013/14.
WorleyParsons now expects net profit in the first half of the financial year to be between $90 million and $110 million.
It said the decline in its Australian business was greater than expected, as hydrocarbon projects in the nation’s north neared completion and as its metals and minerals business stayed weak.
Its Canadian operations were being hit by delays in major projects and cost increases in its construction and fabrication business, WorleyParsonsCord.
Its Latin American business had been hurt by softening in the global metals and minerals market. In the Middle East, the year had started slowly with delays in several projects.
Despite all this, chief executive Andrew Wood was optimistic on the company’s future.
“Notwithstanding the impacts weaker-than-expected market conditions are having on our performance, the cost reduction program we are implementing together with the momentum from recent contract awards should position us for medium-term growth,” he said.
“The diversity of our business in terms of its geography, industry sector and service offering remains a fundamental strength.”