It has not been a good week for Rotork, the company which produces valves have watched its shares drop a staggering twelve per cent. This drop in shares came after a profit warning announcement by the company.
Unfortunately for the company, Rotork has experienced a number of delayed and cancelled projects which is expected to impact their profits.
As many people will be aware, Rotork produces valves for the oil and gas and nuclear and power industries. Like many other businesses, Rotork rely on these industries in order to continue producing valves. If one of these industries experiences trouble, it unfortunately has a bit of a domino effect and Rotork is also negatively impacted.
Rotork’s profit warning has been put down to a mixture of the low price of oil and the launch of shale technology. Both the oil and gas industry have been hit hard recently and now Rotork are starting to feel it too.
In a statement, Rotork has explained that the second half of the year has been a huge challenge. The company said that August was a particularly bad month for the business and this has been put down to delays in a number of projects and a number of cancellations. Rotork were expecting more orders in the third quarter which have now been put back until 2016, affecting their profits.
Rotork now expects their revenue to be between five hundred and thirty million pounds and five hundred and fifty five million pounds. They are also expecting an operating profit of between one hundred and twenty million pounds and one hundred and thirty million pounds.
The twelve per cent fall means that Rotork experienced the second biggest fall on the FTSE 250 index. Unfortunately, experts predict that there is more doom and gloom to come. The biggest fall came from Smiths Group. The company who has not yet released their full year results are this year’s biggest FTSE 100 faller. Smiths Group work with all of the major oil and gas companies, including Chevron Corp and BP
Many experts have stated that those businesses working in the oil and gas industry have a gloomy outlook because of the low oil price. There are a number of challenges facing the oil and gas industry therefore, companies like Rotork can expect further delays and cancellations.
This is because many businesses in the oil and gas industry are going to be cost cutting in order to survive.
Analysts have explained that even the biggest companies are not safe.
But, as mentioned earlier it isn’t just the oil and gas industry that is having a negative impact on the business. Other markets such as water and power are also struggling and affecting the company’s profits.
Similar companies to Rotork that have also experienced their shares drop. Companies include Weir Group and Babcock International. Weir Group is known for producing pumps and Babcock International is known for supplying engineering and support services.