This week, subsea major, Technip, introduced its restructuring plan in order to tackle the challenging industry environment, speculating an even tougher and prolonged downturn.
Following the announcement that Technip will take one-off charges of €650 million due to restructuring, the company’s shares plunged about €5 on Tuesday at €48.55 only to come back Friday at above €51. Since April, Technip has seen its shares drop some €15.
In addition, analysts at French bank and financial services company BNP Paribas have downgraded the French engineering giant from outperform to neutral as the company announced headcount reduction of some 6000, fleet downsizing to 23 vessels, and also that majority of the one-off costs will be included in Q2 2015.
Furthermore, on the same day of the restructuring plan announcement, Technip’ CEO Thierry Pilenko and CFO Julan Waldron held a press conference where Pilenko said he believes the “lower level of new project awards the industry is seeing at the moment is going to be more long lasting than many in the industry think.”
He also added that changes on client management teams have slowed down negotiations and in some cases stopped and even become legal. Furthermore, Pilenko pointed out that customers are pushing to further cost reductions by maintaining pressure and delaying projects, resulting in irrational bidding.
According to the company, the biggest impact, however, is expected in the onshore/offshore Latin America including Brazil, some peripheral countries in Europe and Asia where Technip has seen lower-than-expected results, unlike its subsea division which has been the driving force for the company in the first quarter, but nevertheless will also be affected by Technip’s long-term adjustment to market conditions.