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UK's Wood sales forecast misses estimates as oil outlook dims

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By Reuters

By Aditi Sebastian

-British consulting and engineering group Wood Plc forecast 2021 revenue that came in below market expectations on Tuesday as renewed concerns about global growth and oil demand clouded the outlook for its largest division serving energy customers.

Shares of the Aberdeen-based company, which is shifting away from its dependence on upstream oil and gas to higher margin consulting and engineering services, were down more than 4% in morning trade, lagging the FTSE midcap 250 index.

The group forecast 2021 revenue between $6.6 billion and $6.8 billion, down from $7.56 billion last year and below a $6.91 billion company-provided consensus.

Wood’s adjusted core profit fell 14.1% to $262 million in the first half ended June 30. Revenue fell 23% to $3.15 billion.

The group, whose clients include Shell and Scottish gas network operator SGN, is under pressure as worries that new coronavirus variants could derail global recovery have led customers to cancel new contracts and scale back existing ones as they slash spending.

J.P. Morgan analysts called the full-year forecast slightly soft and the net debt disappointing, but said the upper end appeared achievable given work in hand and order momentum.

Wood’s orders rose 9.1% year-on-year to $7.69 billion as of June, which Chief Executive Robin Watson said should boost sales in the rest of the year.

“Trading momentum and good growth in our order book …underpin our confidence in delivering a stronger second half,” he said.

The company skipped an interim dividend, citing ongoing effects of the pandemic.

Wood, which in June agreed to pay $177 million to settle bribery and corruption charges related to a business it acquired in 2017, expects 2021 profit margins between 8.7% and 8.9% thanks to higher high-margin consultancy business activity.

Annual sales in the projects division, its top revenue contributor, are expected to drop about 30% because of larger contract completions and limited new awards.