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Fugro plunges on weakening exploration market

MARTIJN VAN DER STARRE

LEIDSCHENDAM, Netherlands (Bloomberg) -- Fugro NV fell to the lowest level in five years in Amsterdam trading after the Dutch deepwater-oilfield surveyor announced a first-half impairment because of the weakening oil and gas exploration market.

Fugro dropped as much as 21% to the lowest intraday level since August 2009 and was down 17% at 33.74 euros at 9:52 a.m. local time. The company will probably report a one-time, non-cash write-down of 300 million euros ($409 million) to 350 million euros, it said in a statement.

“The more challenging market outlook, combined with the disappointing developments in the first half, have led Fugro to review the valuation of its assets,” the Leidschendam, Netherlands-based company said. Earnings before interest and taxes, excluding non-cash impairment, as a percentage of sales will probably drop to a low single-digit level from 11.4% a year earlier.

Fugro generates about 75% of its revenue from the oil and gas market, several sectors of which have been affected by a delay in capital investments, the company said. Fugro will reassess its midterm strategic targets in the face of current market conditions, it said.

“The overall story is weaker than expected,” Quirijn Mulder, an Amsterdam-based analyst at ING Groep NV, said in an investor note. “Fugro operates in a world in which the competitive arena but especially the clients behavior has changed dramatically over the last couple of months,” said Mulder, who has a hold recommendation on Fugro.

The write-down will have no impact on earnings before interest, taxes, depreciation and amortization, Fugro said. Results will probably improve strongly in all the divisions in the second half compared with the first half, supported by the current backlog and measures being taken, it said.

“We believe the long-term market fundamentals support our strategy, albeit the expected growth will be somewhat slower than we originally assumed,” CEO Paul van Riel said in the statement.

Fugro is scheduled to report first-half results on Aug. 11

07/10/2014

 

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