WorleyParsons Swings to Loss as Global Resources Industry Remains Under Pressure

By Rhiannon Hoyle 
 

SYDNEY--Plunging commodity prices are continuing to sock companies exposed to the hard-hit global resources industry.

On Wednesday, engineering contractor and consultant WorleyParsons Ltd. (WOR.AU) said it swung to an annual loss and warned of more pain ahead--despite a year of hefty cost-cutting aimed at offsetting the pullback in demand for its services from cash-strapped resources companies.

WorleyParsons, which said it saw little prospect of a rebound in oil-and-gas investment, axed 4,200 jobs worldwide last fiscal year and closed down nine of its offices. Its difficulties underscore how the impact of the resources rout extends beyond the companies that mine and drill for commodities.

Oil prices have collapsed to six-year lows amid rising concern over China's economy and persistently high output from the U.S. and the Organization of the Petroleum Exporting Countries, the 12-nation oil cartel. Iron ore and copper are trading near multiyear lows as well, leading WorleyParsons customers in the resources industry to spend considerably less on major projects and exploration.

"Trading conditions are expected to remain difficult in the resource infrastructure market, as both the hydrocarbons and minerals-and-metals sectors re-evaluate new project viability in an era of low commodity prices," said Chief Executive Andrew Wood, adding that the slowdown had deepened in recent months.

WorleyParsons operates across America, Europe and the Asia-Pacific region, and has been restructuring its business since 2013. Mr. Wood said a further deterioration in its various markets since May had made even more cost savings necessary.

The company, which rode the wave of resources investment in recent years, said it would aim to cushion earnings by further reducing overheads and chasing new contracts in other infrastructure sectors, such as power generation, ports and rail.

In the oil-and-gas business, its margins have been squeezed by intensifying competition, with less work to go around as major projects started during the investment boom reach completion. WorleyParsons said demand for its services from mining companies also remained weak.

On Tuesday, resources giant BHP Billiton Ltd. said it had slashed business costs by billions of dollars--from its iron-ore mines in Australia to oil-and-gas fields in the U.S.--and that it would continue paring back spending on existing mines and new projects in the coming years. Other oil majors, including Total SA, have reported aggressive cost-cutting across their operations.

WorleyParsons recorded a loss in its fiscal year through June. It reported a net loss of 54.9 million Australian dollars (US$39.2 million), compared with profit of A$249.1 million the previous fiscal year. The company wrote down the value of goodwill, which includes a company's reputation and customer loyalty, by A$198.6 million and cut its final payout to shareholders by more than half to A$0.22.

Days earlier, rival Boart Longyear Ltd., the world's biggest supplier of drilling rigs to the mining industry, said its annual net loss widened to US$152.3 million.

Write to Rhiannon Hoyle at [e-mail]

(END) Dow Jones Newswires

August 25, 2015 23:26 ET (03:26 GMT)

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