WorleyParsons revenue up, profit down

Engineering company WorleyParsons said it expects a rise in revenue this financial year even as the tough phase in the mining services sector continues.

The company’s revenue shot up by 19.2 per cent to $8.8 billion.

But it posted a net profit of $322.1 million for the past financial year, which is an 8.8 per cent drop from last year.

Analysts said these are the results they anticipated after WorleyParsons’ profit downgrade in May, the SMH reported.

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

The company saw a decrease in demand for resource infrastructure in the “once buoyant Western Australian market” last year, along with a project termination in Europe and Canada and hiked costs in a Brazil venture.

Merrill Lynch senior economist Saul Eslake recently said the sharp rise in unemployment in Western Australia was indicating the state was close to a recession.

A Bureau of Resources and Energy Economics Report said value of projects that have started or are in the offing will fall drastically.

It is forecast to fall to $70 billion by the end of 2017 and $256 billion by the end of the year.

Restructuring expenses from job losses also dragged down earnings.

Chief executive Andrew Wood said engineering activity would drop as LNG projects enter their final construction and delivery stage in the northern parts of Australia.

“I think we’re staying engaged with that market and we see potential opportunities there. But on balance, we see the Australian hydrocarbons sector for us...potentially softening,” Wood said.

The LNG industry recently warned high costs of major projects is jeopardising $150 billion worth of investment in Australia.

Wood predicts a rise in earnings for WorleyParsons this financial year from its various international projects.

He expects increased earnings from the company’s various divisions including minerals, metals, hydrocarbons, infrastructure, environment and power.

The company is also looking to acquisitions and organic growth as part of its strategy to grow.

WorleyParsons won a $92.5 million contract for the development of the Kami Iron Ore project in Canada as well as an extension to its contract with Vale at the S11D project earlier this year.

It won the extension after Vale acquired the installation licence for the S11D project.

Other than WorleyParsons, mining contractors like UGL have also faced the brunt of the mining downturn.

Rae predicts the mining services sector will continue to be tough this financial year.

“From WorleyParsons’ perspective, they’ve downsized in WA to compensate. They had a number of costs in their downsizing operations and we won’t hopefully see those repeated next year, which will help them there,” he said.