Worley Parsons swings to profit but falls short of expectations

Engineering giant Worley Parsons has fallen just short of market expectations despite swinging back to profit.

Worley Parsons CEO Andrew Wood, left, with his predecessor John Grill.

Engineering giant Worley Parsons has fallen just short of market expectations despite swinging to profit for the full year.

The former market darling declared a full year profit of $23.5 million for the year to June 30, a sharp improvement on the prior year’s $54.9m loss.

However, its underlying earnings slumped 37 per cent to $153.1m, below market projections for a marginally less extreme drop to $156.8m.

Worley Parsons’ aggregated revenue also slid more than expected, falling 18.5 per cent to $5.89 billion.

Analysts had projected aggregated revenue of $6.27bn for the year.

The result rounds off a mixed picture for engineering groups exposed to the mining sector and comes on the heels of a sell-off in the sector yesterday as Bradken and Monadelphous results disappointed.

Worley Parsons skidded 5 per cent during the Tuesday session but rebounded 1.5 per cent in early deals today to see it trade at almost treble the price low reached in February.

The company’s chief executive Andrew Wood said the result showed progress in its cost-cutting program to address soft market conditions.

“During the year we have made substantial progress on our priorities including reducing internal costs, improving customer productivity, optimising the portfolio and strengthening the balance sheet,” he said.

“We have achieved annualised cost reductions of $200 million exceeding our expected run rate of $120 million by the end of June. These savings mitigated the impact of lower revenues on our underlying EBIT margins.”

Mr Wood said more cost reductions would be achieved through the coming year, helping offset the compression of revenues.

“We expect trading conditions to remain challenging, leading to continued pressure on aggregated revenue,” he said.

“We are focused on protecting revenue and gross margin, achieving further overhead reductions and strengthening the balance sheet. The benefit of the cost reductions in the first half are expected to be reflected in second half earnings.”

Worley Parsons opted against paying a dividend.

At 10.22am (AEST), Worley Parsons traded up 1.5 per cent at $8.81.