Shares of Glasgow-based international mobile power firm Aggreko fell roughly 12% after it said 2016 revenue and profit fell and that it expects the current full year profit before tax and exceptional items to be lower than 2016.
Aggreko has been hit by the repricing of contracts in Argentina and said low oil prices have had an impact on a number of its markets, particularly North America.
Aggreko said revenue for the year ended December 31, 2016, slipped 3% to £1.515 billion and profit before tax and exceptional items fell 12% to £221 million.
Commenting on current trading and outlook, Aggreko CEO Chris Weston said: “We expect to see growth across the group in 2017, augmented by incremental annualised cost savings of £25 million from the second half.
“However, this will be more than offset by the significant impact of Argentina and as a result we expect full year profit before tax and pre-exceptional items to be lower than last year.”
Full year dividend per share was unchanged at 27.12p.
Aggreko said its 2016 North American revenue was down 18%, driven by the low oil price, and that its oil and gas and petrochemical and refining sectors were “significantly” down in volume and price, impacting both revenues and margins.
In its power utility business, Aggreko suffered reduced volumes and “material discount to original Argentina contracts.”
“Power solutions utility revenue was down 13% driven by the off-hire of 173MW of our gas-fuelled plants in Mozambique at the beginning of the year where permanent power came on line, and a reduction in Argentina, reflecting pricing on contract extensions …” said the firm.
“Our largest utility contracts are in Argentina where we have been operating since 2008.
“These are the last significant legacy contracts, signed at a time when the industry dynamics were different and the risk of operating in Argentina was higher including strict foreign exchange controls and bond defaults …
“In the near term the Argentina contract repricing will impact both margins and returns …”
Aggreko shares fell to around 925p, giving it a stock market value of just under £2.4 billion.