Wood Group Sees Profits Tumble On “Unparalleled” Oil Market Challenges

Wood Group has predicted that first-half profits will tumble by nearly one-fifth, amid the "unique and unparalleled challenges" presented by the coronavirus pandemic.

The engineering giant said that the slump in oil prices led to delays in order intake.

It added that first-half revenues would be down about 11 percent on the previous year.

The company, which provides engineering and technical services to industrial and energy markets, said that core adjusted earnings would come in between $297m (£237m) and $305m.

It said the order book at the end of May was down about 11 percent.

Chief executive Robin Watson said: "The global engineering and consultancy market is facing unique and unparalleled challenges in 2020 from Covid-19 and volatility in oil prices.  

"Despite the disruption, we are continuing to successfully win and execute work, supported by our strategy of broadening the business across the global energy market & the built environment. 

"The relative strength we are seeing in chemicals & downstream, the built environment and renewables, where we will double our revenues in 2020, is helping to mitigate the impact of challenging conditions in upstream and midstream oil and gas.  

"We have a proven track record of leveraging our flexible, asset light model at pace to protect margin and in Q2 completed the actions required to deliver overhead cost savings of over $200m in FY 2020″

Shares rose two percent in early trading.

David Barclay, senior investment manager at Brewin Dolphin, said: "Wood has remained relatively resilient against a very challenging backdrop - the effects of Covid-19 on the oil and gas market has underlined the importance of the business's decision to diversify its offering.

"Nevertheless, Wood's fortunes are still largely tied to the direction of the oil price, and there is likely to be more volatility ahead."

By CityAM 

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