Aggreko shares tumble after profit warning

24th Jul 2015 09:05

(ShareCast News) - Shares in Aggreko tumbled 15% after the temporary power provider said its interim and full-year results are likely to miss market expectations as a result of ongoing security challenges in Yemen and a further slowdown in its North American oil and gas related business.The company now expects full-year pre-tax profit to be between £250m and £270m at current exchange rates, which have moved adversely in recent months, compared with market expectations of around £290m.Aggreko said that in Power Projects, its 325MW of gas contract extensions in Bangladesh are entering the final stages of approval and it expects that 180MW will be secured into the first half of 2016 and the remaining 145MW for three years.The company said the trading terms secured for these extensions, which would retrospectively apply from the second quarter 2015, are likely to be less favourable than its earlier expectations."While we will be seeking to mitigate the profit impact by reducing operating costs, there will be a net adverse impact on profits this year and in 2016," it said. "The ongoing security challenges in Yemen have impacted our ability to operate at full capacity and we remain concerned about the impact for the remainder of the year." Aggreko said in its May update that it had started to see a decline in volumes and pricing in its shale oil business and that the full-year impact of a lower oil price on its business remained unclear.Since then, it has seen a further slowdown in North America with volumes in the shale basins continuing to decline. More recently, it has begun to see an impact on its offshore oil and gas business in the Gulf of Mexico.RBC Capital Markets, which had penciled in £290 in profit, said the news was disappointing, especially considering the company only commented in May that trading was in line.It said that having spoken to Aggreko, £11m of the reduction is forex related and Bangladesh is easily the biggest proportion of the remainder.Investec said that taking the bottom end of the company's range against its below-consensus forecasts would equate to a 12% downgrade at both the pre-tax profit and earnings per share line."We have been cautious on the high valuation against an increasing risk profile for some time, the market will now need to realign this," said the brokerage, which rates the stock at 'sell'.At 11:46, shares were down 13.5% at 1,237p.