Lamprell, the UAE rig builder, said yesterday that it expects another tough financial year ahead, after cutting more than 5,000 jobs from its workforce.
In a trading update the company warned that it expects revenues to be substantially lower this year, at the lower end of its previously forecast range of US$400 million to $500m.
Last year’s revenue was about $700m, the company said, which compared with $870m the year before and more than $1bn in 2014.
The company’s London-listed shares dropped sharply at the start of trading yesterday.
The stock fell as much as 9 per cent and was trading 7.1 per cent lower at 94 pence at 4pm in London.
Lamprell and other rig makers have been hit hard by the oil and gas industry downturn.
Despite a recovery in oil prices in the past few months it will not be enough to boost spending by Lamprell’s customers in the coming year, the company’s top executive said.
“Our customer 2017 capital budgets are already established and in place,” said John Kennedy, Lamprell’s executive chairman, in the trading update.
“There is little expansive flexibility in the associated expenditures. [So] the company continues to believe that 2017 will prove a particularly cautious environment,” he added.
The company has already made steep cuts to its workforce to reduce costs. Headcount was down at 4,000, compared with more than 9,300 when the company last reported in September, Lamprell said.
The workforce is overwhelmingly comprised of Indian nationals, both in the company’s three main yards in Hamriyah, Sharjah and Jebel Ali, as well as in its administration and support offices.
Some of the layoffs have come as workers in its shipyards were let go as contracts came to an end, but the company also says it cut administrative staff – which numbered about 1,300 in September – by 20 per cent, which has included laying off a former chief operating officer and other senior management staff.
Lamprell also strongly hinted that its full-year results would include another write-off of goodwill value from its balance sheet, which it says still reflects substantial goodwill from its US$336 million acquisitions of Sharjah-based Maritime Industrial Services in 2011.
The company said in its half-year results that assets were $69m lower than at the end of the previous year, at just over $1 billion. Company spokespeople could not say how much goodwill might be written off for the full year.
Lamprell has pinned significant hopes for the future on finalising its deal with partners National Shipping Company of Saudi Arabia (Bahri), and Hyundai Heavy Industries to develop a maritime yard in Saudi Arabia that will provide engineering, manufacturing and repair services for offshore rigs, commercial vessels and offshore support vessels.
The initial agreement for that project was signed a year ago and a deal to do feasibility studies in June, but the partners are still awaiting the final investment decision from Saudi Aramco.
The deal is thought likely to proceed, however, as it is part of the kingdom’s Vision 2030 to build the yard at Ras Al Khair, 60km north of Jubail, on Saudi’s Arabian Gulf coast to create more than 80,000 jobs by 2021.
Saudi Aramco has already awarded initial engineering contracts for the $12bn project.
Lamprell said that its ongoing contracts, which have included winning a maintenance deal for offshore wind turbines in the North Sea, as well as its severe cost-cutting have meant it remains financially sound, with a cash position at the end of the year exceeding that of the previous year.
amcauley@thenational.ae
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