12% Down: Here's why Worleyparsons Limited is getting walloped

The Worleyparsons Limited (ASX:WOR) share price is getting walloped.

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Attention shareholders, look away now!

The Worleyparsons Limited (ASX:WOR) share price is getting walloped.

Source: Google Finance
Source: Google Finance

In a statement to the ASX this morning, the mining services business delivered a result which shocked the market.

For its half-year to 31 December 2016, Worleyparsons reported a 35% decline in revenue to $2.7 billion and a loss of $2.4 million — down from a profit of $23 million in the same period last year.

The company reported a number of write-downs and impairments to the tune of $81.5 million, or $60 million on a net basis.

"We have made substantial progress on our priorities of reducing internal costs, improving customer delivery and optimizing the portfolio," Worleyparsons CEO Andrew Wood said. "Gross margin increased as project and customer delivery performance improved."

The company did not pay a dividend but said it is aiming for $450 million in annualised savings by the end of its 2017 financial year.

"Notwithstanding that market conditions remain challenging, customers' sentiment is improving and they are informing us that their activity levels are not expected to deteriorate further," Mr Wood added. "The benefit of the cost reductions achieved by the Company in the first half, are expected to be reflected in second half earnings."

Should you buy Worleyparsons shares in 2017?

Worleyparsons appears to have caught investors off-guard with today's announcement. While the business could make cost reductions and return to profitability sooner rather than later, I think the business is not a good one for the long term. At least, not as a core position.

Motley Fool Contributor Owen Raszkiewicz does not have a financial interest in any company mentioned. Owen welcomes and encourages your feedback. You can follow him on Twitter @OwenRask. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on ⏸️ Investing

A white and black robot in the form of a human being stands in front of a green graphic holding a laptop and discussing robotics and automation ASX shares
Technology Shares

Joining the revolution: How I'd invest in ASX AI shares right now

Advances in artificial intelligence (AI) could usher in a new industrial revolution. Here’s how you can invest in it.

Read more »

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »