Shares of Glasgow-based Aggreko, the world’s largest temporary power firm, fell 10% after it said its “power solutions” business saw year to date new orders fall 35% and continued to see delays in payments from some customers.
Aggreko said in a third-quarter trading update: “No customers dispute the debt, all have made payments and we are in discussions with customers to reduce the remaining overdue debt.”
Aggreko has been hit by the repricing of contracts in Argentina.
Aggreko said its trading revenue excluding the impact of currency and pass-through fuel for the third quarter was 1% up on last year with reported revenue up 8%.
Excluding the impact of Argentina, revenue was up 3% on an underlying basis.
“Power solutions industrial revenue was 6% higher with continued strong performance in Eurasia where order intake remains robust at 255 MW (2016: 259 MW) year to date,” said Aggreko.
“The good performance in Africa has also continued in the third quarter.
“Following a strong first half there was a small decrease in the Middle East driven by lower volumes in Qatar after the imposition of sanctions, and Saudi Arabia where the lower oil price continues to impact the economy.
“Although revenues in Latin America were down in the quarter, operating profit increased as a result of the restructuring work which was completed earlier in the year.
“Power solutions utility revenue was 15% lower than last year driven by repricing and off-hires in Argentina.
“Excluding the impact of Argentina, revenue decreased 7%.
“Year to date order intake is 666 MW (2016: 1,034 MW) which includes 200 MW in Bangladesh, and excludes the acquisition of KBT.
“The prospect pipeline continues to be healthy, however it is still taking longer to convert than last year.
“In Japan, half of our 148 MW contract has off-hired early, paying an early termination fee, and we expect the rest to off-hire in the first quarter of next year.
“In addition we continue to expect that the remaining 214MW of volume in Argentina will off-hire at the end of 2017.
“Regarding the current situation in Zimbabwe, our site remains secure, manned by our local employees and we remain in regular contact with the customer.
“In separate discussions we have recently agreed with the customer to reduce the volume on hire from 200 MW to 120 MW, and these sets are being redeployed to our new contract in Bangladesh.
“The off-hire rate for the nine months ending 30 September 2017 was 24% and we expect the full year off-hire rate to be in line with our historic average of around 30%.”
Aggreko said its “rental solutions” revenue was up 9% on last year including revenue from the hurricanes that impacted the Southern United States and the Caribbean.
“In North America revenue was up 10% on prior year; 3% excluding the impact of the hurricanes which generated incremental work but also resulted in the cancellation of scheduled maintenance work,” said Aggreko.
“The wider rental solutions business also contributed to the growth with a strong performance in Europe, particularly in UK utility sector, and a solid performance in Australia Pacific, with increased activity in the mining sector …
Aggreko concluded: “Our full year guidance remains unchanged.
“The trading performance continues to support our view that, Argentina aside, we will grow this year.
“Forecast fleet capital expenditure is unchanged, at around £300 million.”