Amec Foster Wheeler PLC (LON:AMFW) reported a decline in first half revenues and profits but shares gained as it announced a “landmark" contract in Western Australia.
The British oil and gas services company, which is being taken over by John Wood Group PLC (LON:WG), said its Clough Amec Australia joint venture has won a contract to provide maintenance services at Yara International’s liquid ammonia plant near Karratha.
Liquid ammonia is a raw material for the manufacture of fertilisers.
Clough Amec will also provide maintenance services to the adjacent technical ammonium nitrate manufacturing plant – used for explosives in the domestic mining market – on the Burrup Peninsula.
The contract is for an initial five years with an option to extend for another five.
Shares rose 3.47% to 453.50p in afternoon trade as investors seemed to focus on the contract and shrug off a weak first half performance.
Weak oil and gas markets hurt first half profits
Trading profit dropped 8% £162mln from £177mln the same period a year ago, hurt by a slump in upstream oil and gas markets.
Revenue fell 18% to £2.3bn from £2.8bn and adjusted profit before tax edged down 12% to £123mln.
Total order book value for the company stood at £5.6bn, compared with £6.2bn last year. The oil, gas and chemicals unit’s order book fell 3% to £2.9bn.
Amec Foster addresses competition concerns of Wood Group deal
Earlier this month,the UK’s Competition and Markets Authority (CMA) said Wood Group’s proposed acquisition of Amec Foster could lead to competition concerns in the supply of engineering and construction services and operation and maintenance services.
In response, Amec Foster said it is putting up its North Sea operations for sale and a competitive process is underway.
The group also said that it delivered on its cost saving targets during the first half and has made a strong start to its transformation programme.
“I am encouraged that the first wave of benefits of the transformation programme we began last year is now evident,” said chief executive John Lewis.
“Operational discipline has improved, we have more than delivered on our cost saving targets and we have also seen the first tangible signs of sustainable growth: in the retained operations, trading margin is up 180 basis points compared to first half last year with a 2% increase in the order book since the year end.”
Lewis added that although some of its end markets “remained challenging”, he was pleased that the company is making progress.
“Looking forward, I am confident Amec Foster Wheeler is now moving in the right direction, and I believe that our people and shareholders will have an exciting future as part of the Wood Group, once the deal closes in the fourth quarter."