Aggreko Issues Profit Warning Due to Oil, Gas Slowdown
LONDON, July 24 (Reuters) – British temporary power firm Aggreko said on Friday that its pretax profit for this year would be between 8 and 15 percent lower than market forecasts, due to a slowdown in oil and gas and less favourable contract terms.
It shares dived 15 percent after the announcement.
Aggreko said its North American business had been hit by a lower oil price and declining activity there meant less equipment was being hired in both shale basins and the Gulf of Mexico.
Elsewhere, the company said security challenges in Yemen meant it could not operate all of its generators and equipment, while in Bangladesh the terms of a contract extension now being finalised would not be as favourable as it had hoped.
It said it now expected full-year pretax profit of between 250 million pounds ($387.73 million) and 270 million pounds at current exchange rates, for the year ending in December.
A Thomson Reuters poll of 17 analysts has forecast a pretax profit of 293 million pounds.
The company also said it had been affected by adverse exchange rate movements in recent months without giving details.
Shares in the company, whose equipment powers major events and covers electricity shortfalls, plunged 15 percent to a five-year low, making the stock the top loser on Britain's mid-cap index.
In March the company had said its profit this year would be unchanged from last year at 289 million pounds.
"We have been cautious on the high valuation against an increasing risk profile for some time, the market will now need to realign this," said Investec analyst Andrew Gibb, who has a "sell" rating on the stock.
Aggreko has in recent years benefited from expanding its business into emerging economies, some of which are now being affected by increasing geopolitical uncertainty or falling commodity prices.
Equipment companies globally are being affected by the oil and gas slowdown. U.S. giant Caterpillar Inc said on Thursday that the good times were over and it would prune operations and cut costs to adapt.
Aggreko's Chief Executive Chris Weston, who joined in January this year, is due to give an update on the company's strategy on Aug. 6, when the company releases half-year results. ($1 = 0.6448 pounds)
(Reporting by Sarah Young; Editing by Kate Holton and Susan Fenton)
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