Worley stock fell sharply on Thursday, sliding 8.8% to A$11.20 after management raised the expected impact of the Middle East conflict on the company’s annual earnings to A$60 million ($41.4 million). That revised figure is almost twice the A$30 million-A$40 million range the firm had cited previously.
The company said the stronger-than-anticipated charge from the Middle East comes on top of an already heightened earnings sensitivity to currency movements. Worley warned that a firm Australian dollar will have a greater negative effect on its full-year results than earlier signalled.
Analysts and investors focused on two structural factors the company highlighted. First, Worley’s concentration in oil and gas - which represents more than half of its operating revenue - remains a significant drag on performance. Second, heightened geopolitical tensions in the Middle East have led clients in the region to delay both the start and award of new projects, reducing near-term revenue visibility.
While the announcement noted there had been a recent U.S.-Iran peace deal that suggested some improvement in stability, market participants were said to be awaiting a more comprehensive settlement before project activity normalises. Worley’s statement stressed that, despite that limited stability signal, project timing and awards in the region continue to be pushed back.
The firm’s share-price reaction occurred against a soft finish for the wider Australian market. The S&P/ASX 200 declined 0.4% on the same trading day, offering little offset to Worley’s selloff.
Investors will be watching subsequent updates from the company for any further detail on how the A$60 million impact and currency effects are expected to flow through pre-tax and reported earnings. For now, the combination of elevated exposure to oil and gas, project deferrals in the Middle East, and currency headwinds underpinned the steep move lower in the stock.
Clear summary
- Worley raised its expected earnings hit from the Middle East conflict to A$60 million, up from A$30 million-A$40 million.
- The company flagged a larger-than-expected drag from a strong Australian dollar.
- More than half of Worley’s operating revenue comes from the oil and gas sector, which is weighing on results amid client delays in the Middle East.