Petrofac (PFC) says it has been “materially impacted” by Covid-19 and the oil price crash in the first half of its 2020 financial year.
In its larger ‘engineering and construction’ (E&C) business, revenue is guided to be $1.6bn for the six months to 30 June, falling short of the $2.3bn seen a year earlier and analyst expectations of $1.7bn. This comes as projects have been set back by pandemic disruption and the company believes it will not be able to make up for these delays this year. The division’s net profit margin is also projected to drop from 6.5 per cent to just 2.0-2.5 per cent thanks to coronavirus-related costs and the commercial settlement of the completed Jazan refinery and terminal project for Saudi Aramco (SA:2222).
New E&C orders have also slowed. So, despite Petrofac pulling in $1bn of new orders so far this year, the $6.4bn order backlog is currently $1bn smaller than the December year-end position.
In light of the Covid-19 crisis, the final 2019 dividend was scrubbed in April, saving $85m. Together with a 40 per cent reduction in capital expenditure, the company is aiming to preserve $145m of cash flow this year. In addition, it is on track to make $125m of cost savings in 2020 and a further $200m of efficiencies in 2021. Still, with the unwinding of favourable working capital movements, it had swung from $15m of net cash at the December year-end to $139m of net debt (excluding lease liabilities) by the end of May.
