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Shares I Love: Worley

Worley should benefit from investment in meeting net zero carbon emission targets
June 23, 2022
  • Worley provides engineering, procurement and construction services to energy-related companies
  • It is helping its customers to meet their net zero carbon emission targets

Fiona Yang, co-fund manager of Invesco Asia Trust (IAT), explains why she invests in engineering company Worley (AU:WOR).

Worley is a global company headquartered in Australia which provides engineering, procurement and construction services to the energy, chemical and resources mining industries. Its customers scaled back capital expenditure plans after the outbreak of Covid, leading to a sharp contraction in revenue and profit margins for the company. But it is during such events that I like to turn my attention to companies which are experiencing a distinct lack of love from the market for reasons that may be misguided. As a contrarian investor, the whole point of owning an unloved stock is the hope that it will one day turn into a market darling.

Many of Worley’s clients still operate in sectors reliant on fossil fuels. However, it should be categorised as a ‘transformer,’ to use the language of sustainable, and environmental, social and governance (ESG) investing. The company is using its expertise to make the energy, chemical and mining industries greener.  

Growth at Worley is increasingly being driven by energy transition capital expenditure, with its management setting itself a target of generating 75 per cent of the company’s revenue from sustainability-related business within five years. At present, Worley generates 32 per cent of its revenue from sustainability-related business.

It is estimated that investment worth $140tn (£114.71tn) will be required to achieve net zero carbon emission targets by 2050, in areas including carbon management, infrastructure buildout and adoption of clean energy. This is an almost fourfold increase on all energy supply capital expenditure in the previous 30 years, according to investment bank UBS. Worley wants to play an important role in that by helping its global clients to achieve their net zero carbon emission targets.

We are under no illusions as execution is key. But if history is any guide, Worley is well set up. It has long established relationships with global energy and chemicals majors, already has a good track record of successfully executing hundreds of thousands of green transition projects, and has around 48,000 employees. This matters, because energy transition projects are more complex than traditional energy projects and having this expertise puts Worley in a strong competitive position.