Technip Tumbles on Forecast for Narrower Profit Margin
Technip SA (TEC), Europe’s largest oilfield-services provider by market value, fell to a two-year low in Paris trading after saying its profit margin in the subsea division will narrow next year.
The shares dropped as much as 10 percent to 60.20 euros, the lowest price since October 2011, and were at 61.94 euros as of 9:53 a.m. local time.
“Subsea operating margins will be exceptionally low in the first quarter 2014 at around 5 percent,” the Paris-based company said yesterday in a statement. They’ll recover to at least 12 percent for the full year.
The outlook “was clearly worse than expected,” Bertrand Hodee, an analyst at Raymond James who has a market perform rating on the shares, said in a note. Analysts had estimated a full-year margin of 15.1 percent, he said.
Technip attributed its forecast in part to longer maintenance on some vessels and costs from starting a new plant in Brazil. Oilfield surveyor CGG SA (CGG) also cut its profit outlook yesterday, saying energy explorers had deferred orders.
Concerns that clients will rein in spending in the coming years are “a little overplayed,” Technip Chief Executive Officer Thierry Pilenko said on a conference call after the market closed yesterday. While customers are reviewing some projects, tenders of new contracts are “good,” he said.
Technip expects a 2013 margin at its underwater-pipe division of 14 percent. The subsea margin will rise to 15 percent to 17 percent in 2015.
West Africa and Brazil will probably produce the biggest contract awards next year, according to Pilenko. The company also operates in Europe, Asia, Africa and the Middle East, where today it announced a $400 million order from Kuwait Oil Co.
To contact the reporter on this story: Tara Patel in Paris at firstname.lastname@example.org