EXOVA, the Edinburgh-based materials testing firm, has said it still sees no sign of improvement in the key oil and gas market and is braced for the down turn in the industry to continue next year.
Three months after highlighting how tough trading conditions have been in the North Sea, Exova gave a sober assessment of the state of the industry which it relies on for much of its business.
“Oil & Gas remains challenging and we have no current visibility of any market improvement” said stock exchange-listed Exova in an update on trading in the ten months to 31 October.
It added: “For 2017, we continue to anticipate modest organic revenue growth supplemented by acquisitions, albeit with a less favourable business mix due to continuing pressures in Oil & Gas and the expected reduction in volumes in engine-testing.”
The update underlines the scale of the challenges that the fallout from the crude price plunge has posed for firms across the oil and gas supply chain.
Exova has seen cuts in spending on new oil and gas rigs and upgrades hit demand for the specialised metal testing services it provides.
The company’s comments suggest directors see little prospect of oil and gas firms loosening the purse strings in coming months, in spite of hopes that major producing nations such as Saudi Arabia will cut output to help support prices.
There has been a partial recovery in crude prices in recent weeks driven by hopes that members of the Opec club of producer nations will agree to curb production when they meet next Wednesday.
Brent crude traded at $49.05 per barrel yesterday, compared with $27/bbl in January and up around five per cent on the week.
After Philip Hammond delivered his Autumn Statement on Wednesday trade body Oil & Gas UK
said the government had to work with the industry to help address the urgent need for fresh investment in the North Sea.
Exova increased total revenues by around 11 per cent in the first ten months, helped by the fall in the value of the pound following the Brexit vote. This increased the sterling value of sales made in foreign currencies by the company, which also serves firms in sectors such as aerospace and health care.
Stripping out the currency effect and the benefit of acquisitions sales fell by 0.2 per cent year on year reflecting the importance of oil and gas revenues.
However, the company said it expects full year earnings to be in line with previous guidance, despite more challenging conditions since the half-year.
Chief executive Ian El-Mokadem said: “The Group has made satisfactory progress in the first ten months of 2016. We continue to generate good organic growth outside of our Oil, Gas & Industrials sector, and our acquisitions programme continues to deliver.”
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