Worley sees capex climbing in major markets

Engineering major builds backlog to $15.1 billion

Global engineering group Worley says it is “seeing positive indicators” to support its expectations for better sales and earnings in the second half of FY22 after improving its net profit to A$114 million from $60m at the same time in FY21 on 4% lower first-half revenue of $4662m.

The ASX-listed energy, chemicals and resources engineering company said all of its core markets were seeing capex investment growth year-on-year – with oil, chemicals and mining investment up 12%, 13% and 7%, respectively, compared with 2021 levels – while 2022 “renewables and gas” investment was up 14% yoy.

Worley, which generated A$8774m revenue last year, said its belief in stronger H2 performance was based on “the mix and timing of projects” in its $15.1 billion sales backlog and growth in its “factored sales pipeline”.

“Revenue is down [in the first half] on the prior comparative period but has steadied over the half as site access and project activity levels return,” the company said, adding it was now “not seeing material COVID-19 related impacts on supply chains, site access or project deferrals and cancellations”.

“We continue to attract and retain talent while building capability in support of our strategic transformation journey [a shift from traditional energy and mining to ‘new’ energy and so-called sustainability projects].”

Worley CEO Chris Ashton said: “We’re seeing stronger market activity as our customers continue to invest in their traditional business as well as increasing investment in line with the fundamental shift towards net-zero. Our business is positioned for long-term success and our strategy places us at the centre of this investment activity.”

Worley’s “sustainability pathways” revolve around decarbonisation investment and projects, including nuclear energy, resource stewardship and asset adaption, new design and closure, and environment and society programs. Its $1.4 billion of designated FY22 H1 sustainability-related business (32% of aggregated revenue) was up from $1.2b in H1 FY21.

“We aspire to 75% of our revenue from sustainability-related business within five years,” the company said.

“We are accelerating sustainability-focused growth and as a catalyst for this we are investing a total of $100 million over three years to organically build our capability through new solutions and strategic hires, digital enablement, technology selection and development, internal training and strategic partnerships. For the half year we spent $13 million on this investment.”

Worley identifies Rio Tinto and Vale among selected customers making big “low-carbon investments”, with Rio down to spend US$7.5b to lower emissions between 2022 and 2030, and Vale allocating US$2b to cut its scope one and two emissions by 33% by 2030.

On a whole other level, Spanish energy company Iberdrola was pumping more than half its €68b “organic investment” between 2020-2025 into renewables and 40% into networks, while Danish power company Orsted was making €57b of investments in renewables by 2027.

Sustainability-related work reportedly makes up 26% of Worley’s current backlog ($3.9b).

It counted as “strategic wins in sustainability” the Humber Zero carbon-capture project in the UK, Anson Resources’ Paradox lithium-bromine project in the US, and Occidental’s DAC-to-fuels venture in Canada. Worley is also executing an early engineering services contract for Shell to support possible development of a 200MW electrolysis-based hydrogen plant in the Netherlands, “one of the largest commercial green hydrogen production facilities in the world”.

Worley sees “exponential growth in low-carbon hydrogen production over the coming decade”.

Meanwhile, its biggest division, energy, turned a A$150m profit (up 17%) on $2129m (down 2%) of FY22 H1 revenue; chemicals contributed $133m (+24%) of segment profit on $1622m (-2%) of revenue; and resources chimed in with a $52m (+8%) profit on $617m (-7%) revenue. Resources was formerly known as Worley’s mining, minerals and metals arm.

More than 30% improvement in its resources backlog to $1.7b at the end of 2021 included “significant growth in transition materials” work.

Worley’s share price (ASX: WOR) is up more than 12% so far in 2022, capitalising the company at about A$6.55b.


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