Temporary power provider Aggreko continued to suffer from weakness in the oil and gas industry in the third quarter, as it reported lower revenues and warned that it may need to write off the value of some of its equipment.
Reported revenues increased 8 per cent in the three moths to September 30, but underlying revenues, which exclude benefits from currency movements, fell 7 per cent.
Aggreko said full-year profits would be “broadly in-line” with current market expectations, with “pre-exceptional” profit before tax of around £225m.
However, the company warned that it may take a writedown on the value of some of its specialist equipment for the oil and gas sector.
Weak trading in North American oil and gas markets continued to drag on revenues, pulling underlying revenues in the company’s rental solutions business down 7 per cent despite growth in other regions.
The decline in the shipping sector also weighed on revenues in Aggreko’s power solutions business, where reported revenues were 9 per cent lower.
The company recently divided its business into rental solutions – where equipment is rented out to customers in developed markets – and power solutions, which covers its business in emerging markets, including installing and operating power plants.
Aggreko’s shares had a strong start to the year but have tumbled more than a third since the company reported disappointing first half profits in August, driven by the difficulties in North America.
The company’s shares hit a seven-year low at the start of this month, after analysts predicted significant price cuts from upcoming contract renewal negotiations in Argentina and increased competition in emerging markets.
Aggreko said its offer to replace its current contract in Argentina “represents a significant discount to the historic pricing”. Analysts have predicted price cuts of around 35 per cent.
Chris Weston, Aggreko chief executive, said:
Whilst the environment over the last nine months has been challenging I am pleased with our strong order intake of over 1GW and with the progress that we are making on the implementation of our business priorities. We are working through the status of our contracts in Argentina and continue to navigate the tough conditions in upstream oil and gas in North America.
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