Wood shares fall 7% after trading update

Shares of Aberdeen-based oil and engineering giant Wood plc — which recently completed the £2.2 billion acquisition of rival firm Amec Foster Wheeler (AFW) — fell 7% after it said it currently estimates that 2017 proforma EBITA from continuing businesses will be between $590 million to $610 million.

Some analysts had been expecting a higher earnings estimate from Wood, which operates in more than 60 countries and employs 55,000 people.

In a trading update, Wood said: “Proforma 2017 will include the results of AFW and heritage Wood Group from 1 January …

“In the first half of 2017, Wood generated EBITA of $264 million from revenues of $4.7 billion on a proforma basis.

“Margins continued to be impacted by challenges in oil & gas markets overall and the anticipated reduction in AFWs solar activity from record levels in 2016.

“These challenges were largely offset by growth elsewhere including Environment and Infrastructure, improvements in US offshore greenfield engineering and the impact of cost reduction programmes.

“Reflecting the current trading conditions and typical second half weighting of profit in both heritage Wood Group and AFW,  we currently estimate that 2017 Proforma EBITA from continuing businesses will be in the region of $590 million to $610 million.”

On the integration of Amec Foster Wheeler, Wood said: “Integration is progressing ahead of schedule with significant progress being made …

“At the leadership levels alone, we have already delivered sustainable annualised cost savings ahead of plan since completion in October.

“We have also made good progress on real estate rationalisation, merged bidding pipelines and aligned tendering and delivery governance.

“We remain very confident of delivering cost synergies of over $170 million by the end of the third year following completion.”