Dong Energy said Thursday that it sees "great potential" in its exploration and production activities as it announced that it would be cutting up to 600 jobs across it business.
The Danish firm said that in order to improve its future earnings capacity and enhance its capital structure, it would be implementing an efficiency plan by the end of 2012 to cut costs by DKK 1 billion ($174 million) annually, which include the loss of between 500 and 600 jobs.
The plans were announced as Dong reported results for the first nine months of 2012 that showed a pre-tax loss of DKK 2.4 billion, which was down DKK 5.9 billion on the first nine months of 2011. The company had to make a DKK 2.3 billion provision for three long-term, loss-making gas storage facility contracts in Germany. A further DKK 0.6 billion was written down that was connected to a loss-making contract for capacity at an LNG terminal in the Netherlands.
Consequently, Dong has lowered its EBITDA outlook for 2012 to a range between DKK 8.5 billion and DKK 9 billion.
Dong CEO Henrik Poulsen commented in a statement:
"The results we have delivered for the first nine months of the year are unsatisfactory and so is the fact that we have had to lower our EBITDA outlook for 2012. This is due, in particular, to a European gas market marred by oversupply and low margins, partly because low CO2 and coal prices make the coal-fired power stations more competitive than the gas-fired power stations.
This has been an instrumental factor in considerable provisions and a significant deterioration in the earnings trend in the Energy Markets business area.
"The other four business areas are performing in line with expectations. For example, we still see great potential in our two primary growth areas, Exploration & Production and Wind Power."
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