Weak oil prices dent Rotork profit

FTSE 250 engineer Rotork posted a drop in first-half profit on Tuesday as revenue declined amid weaker oil prices.

In the six months to the end of June, pre-tax profit fell 31.9% to £38.3m on revenue of £263.9m, down 2.7% from the year before.

The company declared an interim dividend of 1.95p per share, in line with the first half of 2015.

Rotork said that while oil prices have stabilised to some degree in recent months, the continuing uncertainty of market conditions has hit customers' medium to long-term investment decisions, with a number of projects becoming uneconomic to develop, particularly in the shale industry.

The company said that as a result, its customers are more cautious when it comes to committing to long-term investment decisions.

Chief executive Peter France said: “The trading environment in the first half of the year remained challenging, with the low oil price continuing to delay project activity and geopolitical tensions affecting certain key markets. The cost management programme previously announced is progressing as planned.

“We expect to benefit further from these cost initiatives in the second half of the year and into 2017, and continue to examine opportunities to drive improvements throughout the business. In line with our strategy, we continue to invest in new and existing markets by opening new sales channels and developing new products.”

Rotork said it expects its second-half weighting to be more pronounced than previously thought, partly due to recent currency movements, with the second half margins ahead of those in the first half. However, it expects margins for the full year to be lower than in 2015 due to a combination of increased overheads, product mix and pricing pressure.

The company said activity in the oil and gas markets was likely to remain subdued but that it remains “well placed” for the current year and beyond.

At 0803 BST, Rotork shares were down 4.3% to 204.50p.