Aggreko Boosts Guidance But Warns On Dollar Weakness
June 20 2011 - 6:09AM
Dow Jones News
Temporary power and temperature control supplier Aggreko PLC
(AGK.LN) Monday ratcheted up its full-year earnings guidance on the
back of a strong first half, but repeated a warning that the gain
could be wiped out by the weakness of the U.S. dollar against the
British pound.
"We cannot protect our trading profits and can only tell the
world what we are doing," Chief Executive Rupert Soames told Dow
Jones Newswires in an interview.
Since Aggreko does business in many parts of the world,
movements in exchange rates, particularly the greenback, could lead
to a reduction in full-year profit by as much as GBP9 million.
"We are still holding our ground" and will continue "to apply a
rate of $1.62 (to the pound) to our forecast," added Soames.
Sterling traded at $1.615 in spot markets Monday.
At 0954 GMT, Aggreko's shares traded down 53 pence, or 2.8%, at
1858 pence, making it the second biggest loser in the benchmark
FTSE 100 index, which traded down 1%. The stock has gained 25% in
value since the start of 2011.
Analysts interpreted Aggreko's decision to raise the rate of
fleet investment by GBP30 million, in addition to the GBP70 million
increase announced in April, as a bullish signal.
"An encouraging sign, and one that highlights Aggreko's position
as the leading, best-capitalized player in the market--this is
especially encouraging considering market worries that APR Energy's
entry onto the London market in September presented a threat to
Aggreko," said Canaccord Genuity in a note to clients. It rates
Aggreko at Buy with a 2200-pence price target.
Horizon Acquisition, U.K. financier Hugh Osmond's listed cash
shell, last week acquired APR Energy Ltd., Aggreko's largest
competitor in the international power projects business. But
Goldman Sachs said it was confident that "Aggreko's leading
position remains unrivalled, given its global presence and larger
fleet size."
Aggreko said it was encouraged by the strong performance of its
local business in the first half, but, cautioned the outcome for
the year would be heavily dependent on trading during the peak
summer season.
Its international power projects business had good momentum and
it expected that the rate of year-on-year growth in megawatts on
rent in the second half would exceed that seen in the first
half.
"We now believe that the rate of growth in underlying profits
for the year as a whole will be a little higher than the 20%
underlying trading profit growth that we expected at the time of
our interim management statement April 27," it said, adding the
caveat about foreign-exchange risk.
-By Sonya Flechon, Dow Jones Newswires; 44-20-7842-9295;
sonya.flechon@dowjones.com
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