Worley boss Chris Ashton says company is keeping an eye on simmering global tensions

Engineering firm Worley is reviewing its global operations amid rising geopolitical fears, with its CEO signalling a pivot away from “higher risk” regions.

Worley is making a major push towards sustainability-led projects.

Escalating geopolitical tensions have prompted a risk review of Worley’s global operations, with the engineering firm’s boss Chris Ashton signalling a potential pivot away from “higher risk” parts of the world.

It follows the company’s withdrawal from Russia in the wake of Vladimir Putin’s invasion of Ukraine last year, which has put the spotlight on the West’s economic and political relationships with other emerging powers including China.

Worley employs about 53,000 people in 46 countries, including in China where it has a 1300-strong workforce.

Mr Ashton said on Wednesday the Worley board had discussed earlier in the week how the company was positioned to respond to trade and political tensions emerging in markets across the world.

“We believe the world is going to split into strong regional alliances, or allegiances, politically, economically,” he said.

“And we’re in the process of modelling what we think those different scenarios could be. We’ll have a look at the different scenarios that could emerge in the future, we’ll look at our strategy, and we’ll pressure test the strategy against that range of scenarios to see how robust it is or whether we need to have response plans developed.

“What I’d say generically is it (strategy) will be away from the higher risk jurisdictions politically, and we won’t enter new jurisdictions that we believe, politically or economically, are not aligned with the larger, developed Western-style economies.

“We have 1300 people in China but if China invaded Taiwan the world would be a very different place. Any company having resource in China would probably be one worry, but the locking up of the global supply chains could be a much bigger worry.”

Mr Ashton’s comments followed the company’s interim results announcement on Wednesday, which revealed double digit growth in revenue and underlying earnings for the six months to December.

Aggregated revenue was up 19 per cent when compared to the first half of 2021-22, reaching$5.2bn, and helping to lift underlying EBITA by 13 per cent to $283m.

Revenue within Worley’s core energy business gained 16 per cent to $2.5bn, with EBITA up 9 per cent to $163m.

EBITA in its chemicals business increased 15 per cent to $153m while its resources division was the biggest mover, with EBITA 44 per cent higher at $75m on the back of a 57 per cent increase in revenue.

Mr Ashton said the growing pipeline of resources projects in the Americas was “beyond anything I’ve ever seen before”.

“It’s driven by geopolitical tensions, the drive to be more independent in terms of critical resource,” he said.

“When you think about some of the majors that are investing, the big resource majors, we’re seeing a focus of them in the Americas - not just North America, but also in Latin America. Big opportunity for us.”

Historically a major services provider to the mining and oil & gas industries, Worley is in the midst of a major shift towards sustainability-focused sectors.

It is investing $100m over three years to build the company’s capacity to support sustainability-led projects such as wind, green hydrogen and carbon capture.

Revenue from sustainability-focused projects reached $2bn in the first half, or 39 per cent of aggregated revenue. The company has ambitions to lift that number to 75 per cent by 2026.

Mr Ashton said the landmark Inflation Reduction Act (IRA) in the US - a $US391bn package of subsidies and tax incentives aimed at driving the country’s transition to clean energy - presented as a huge opportunity for Worley as part of its sustainability drive.

The US is already Worley’s biggest market.

“What’s been remarkable in the US is the impact of the Inflation Reduction Act,” he said.

“We’re seeing that as being a catalyst for increased levels of investment interest in America.

“We’re already in conversations with customers who are specifically referring to investment that has been unlocked as a result of the IRA.”

Worley also announced on Wednesday the sale of its North American turnaround and maintenance business for $US$125m ($180m).

An after tax loss of $196m on the sale means the company’s statutory result for the first half fell to a net loss of $63m, compared to net profit of $114m in the first half of 2021-22.

Mr Ashton said the sale reflected the company’s strategy to focus on higher margin areas of its business including professional services.

The company’s underlying EBITA margin, excluding procurement revenue, was steady at 6.1 per cent in the first half.

While the full-year margin is expected to remain consistent with the previous year, Worley expects it to increase to more than 7 per cent by 2023-24.

In a note to clients, UBS analyst Nathan Reilly said the first half EBITA result, and the full-year guidance, were in line with consensus estimates, while Worley’s increased headcount, order book and tender pipeline supported the company’s medium term growth outlook.

The company’s headcount increased by 9 per cent in the 12 months to December, reaching 52,800 by the end of the year.

“We expect growth will be supported by improving backlog and headcount,” Mr Reilly said.

“Strong momentum remains for remainder of FY23 and into FY24, with growth supported by a strong pipeline of backlog, and sustainability work.”

Worley will pay an unfranked dividend of 25c.

Originally published as Worley boss Chris Ashton says company is keeping an eye on simmering global tensions