Petrofac Limited (LSE:PFC) shares dropped nearly 9% on Tuesday after the company forecast a full-year EBIT loss in its engineering and construction (E&C) unit of around US$190mln for 2022, meaning a total group EBIT loss of around US$100mln.
The company said this reflected adverse commercial settlements, further unrecovered cost overruns in the legacy portfolio and cost increases on the Thai Oil Clean Fuel joint venture contract.
In a statement, Sami Iskander, Petrofac’s group chief executive, commented: “We have maintained strong momentum in Asset Solutions and IES, however group performance for 2022 has been impacted by further cost recovery challenges in E&C.”
But, he said, whilst E&C awards were slower than expected in 2022, the market outlook remains positive and “we are well positioned on a number of near-term prospects, with US$1.5bn of E&C opportunities where we are at preferred bidder stage, and a further US$3.5bn of bids submitted in E&C.”
“We expect these opportunities to provide backlog growth in 2023 and lay the foundations for a return to profitability, positive free cash flow and continued recovery thereafter” he added.
Peel Hunt analysts noted that the US$100mln EBIT loss figure was below their “bottom of the range estimate of a US$44mln" loss. They pointed out that Petrofac now expects EBIT to fall in 2023 compared to its forecast of a small increase.
The City broker's analysts retained a 'buy' rating and 125p price target on Petrofac shares.
In early morning trading, Petrofac shares were changing hands at 66.05p, down 8.7%.