Power supplier Aggreko warned on profits alongside its 2016 results this morning, causing its share price to dive 13 per cent.
It said that 2017 results will be hit by a “significant impact” of weaker pricing on contracts in Argentina.
The company reported a reduction of 24 per cent in 2016 pre-tax profits to £172m after exceptional items, and revenues down 3 per cent lower to £1.5bn. The dividend payout has been kept at 27.12p per share.
Aggreko share price
Why it’s interesting
Although the shares have taken a battering today because of the profits warning, analysts have indicated that the company could benefit from any uptick in the US economy. Donald Trump has also announced his intention to increase spending on infrastructure, which is an important source of income for the firm.
Analysts at Bank of America Merrill Lynch said in a note to investors:
An improving US industrial and oil and gas outlook could mean material upside to earnings in Aggreko’s Rental Solutions business. We believe US margins are 60 per cent below long-run average levels and should snap back quickly if topline momentum improves.
North America constitutes just over 50 per cent of the division (i.e. 22 per cent of group sales).
What Aggreko said
Aggreko Chief Executive Officer, Chris Weston, said:
Whilst the trading environment over the last twelve months has been challenging I am pleased with the progress that we are making across the Group implementing our transformation programme to return the business to growth.
We are investing in the right technologies to reduce costs to our customers; improving our customer focus and delivering the efficiencies we set out in August 2015.