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Amec Foster Wheeler sees oil and gas pressures chipping away at margins

ENGINEERING group Amec Foster Wheeler has warned pricing pressures from oil and gas customers will reduce its margins further over the rest of the year.

The company, which employs around 4,000 people in Scotland across Edinburgh, Glasgow and Aberdeen, said revenue for the first four months of 2015 had dipped 3.6 per cent on a like-for-like basis to £1.6 billion.

As a result it expects full-year revenue to be lower than the £5.5bn it recorded in 2014. Profit is also predicted to be weighted towards the second half of this year.

However Amec Foster Wheeler said its order book has grown more than six per cent from £6.3bn in December to a record £6.7bn by the end of April.

Oil and gas customers are continuing to delay capital spending particularly in upstream projects although it was still seeing growth in the downstream area particularly in the US and Middle East.

The business said it has also seen delays in the North American renewable energy market.

But the pressures in the oil industry, driven by the lower price of Brent crude and continued high production from some countries, is predicted to result in a further but "modest" reduction in trading margins over the rest of the year.

Amec completed the £2bn deal to buy Foster Wheeler in November last year. The combined business said it is on track to make cost savings of around £40m in 2015 but will also take an exceptional charge of £50m.

Chief executive Samir Brikho said the business had experienced "challenging conditions" in the first part of the year but he was pleased with the growth in the order book.

He added: "The integration of Foster Wheeler is progressing according to plan, and we are encouraged by the initial customer reactions to our new service offering, including the first revenue synergy wins."

Separately Amec Foster Wheeler said it had won contracts from ScottishPower's Energy Networks division to build three new power lines and refurbish another one in south west Scotland.

The value of the agreements were not disclosed but are believed to run into millions of pounds.

The work, which takes place next year, will see three 132 kilovolt lines covering more than 52 kilometres in Ayrshire. The refurbishment covers a line between Kilmarnock and Coylton.

The lines will help all forms of energy, including renewable, to be transported from Scotland to England and Wales.

Around 150 people from Amec Foster Wheeler will be working on the project.

Other contracts it has secured in the first part of this year include a 10-year deal to provide radioactive waste analysis at Sellafield and a five-year operations and maintenance agreement with BP for the Forties pipeline system.

Analysts at Investec kept a hold rating on the Amec Foster Wheeler stock citing the oil and gas outlook along with the risks of the integration of the businesses.

Herald Scotland
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