UK contractor Carillion pulls out of Saudi Arabia, Egypt and Qatar

Carillion said Chief Executive Richard Howson would step down and Non-Executive Director Keith Cochrane would become interim chief executive. (AFP)
Updated 10 July 2017
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UK contractor Carillion pulls out of Saudi Arabia, Egypt and Qatar

LONDON: The chief executive of Carillion has stepped down as the Middle East construction slowdown hit home for one of Britain’s biggest builders.
The contractor said it would pull out of Saudi Arabia, Egypt and Qatar as the weak oil price slows construction spending across the Middle East. The stock plunged as it warned on full-year profits and took a provision of £845 million ($1.1 billion).
Philip Green, Carillion non-executive chairman, said: “We are undertaking a thorough review of the business and the capital structure, and the options available to optimize value for the benefit of shareholders.”
Carillion said that Chief Executive Richard Howson would step down and Non-Executive Director Keith Cochrane would become interim chief executive.
Carillion is one of the Middle East’s biggest construction and support services companies, having worked on projects such as the Dubai Canal and Oman’s Royal Opera House. But like other international construction groups that have either sold or reduced their regional businesses, it has suffered from a construction spending slowdown that has accompanied two years of falling oil prices.
The contractor did not say how many jobs would be lost following its withdrawal from three major Middle East construction markets. Carillion said on Monday that it would need to take immediate action to accelerate the reduction in average net borrowing while generating significant cashflow in the short term.
As part of that process, it said it had raised £12.8 million from the disposal of half of the economic interest in its Oman unit, Carillion Alawi.
Analysts at investment banking firm Jeffries said they expected the contractor to raise cash later in the year.
Carillion said it would only undertake future construction work on “a highly selective basis” and via lower-risk procurement routes.”
Carillion reported total contract provisions of £845 million at the end of last month — of which £375 million relates to the UK and £470 million to overseas markets, the majority of which relates to exiting markets in the Middle East and Canada.
That led the builder to revise its full-year earnings guidance with revenues expected to be in the range of £4.8 billion to £5 billion and overall performance expected to be below earlier expectations.
Carillion expects to raise a further £125 million over the next 12 months from exiting non-core businesses. It said it would also suspend dividends this year, resulting in cash saving of about £80 million. The company said it would also withdraw from public-private partnerships in the construction sector.
Carillion, along with rival Balfour Beatty was well known for its work in privately financed construction projects. The procurement method, where builders team up with finance partners to fund major construction projects in return for an operating concession was, expected to become popular in the Middle East as an alternative to traditionally procured contractors.
But it has failed to gain traction in most of the region’s major economies, which still rely on traditional contract forms and competitive tenders to award major infrastructure projects.
Carillion shares fell 39 percent to 117 pence on Monday.


OPEC cut ‘biggest in almost 2 years’

Updated 28 min 12 sec ago
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OPEC cut ‘biggest in almost 2 years’

  • OPEC said in a monthly report its oil output fell by 751,000 barrels per day (bpd) in December to 31.58 million bpd
  • OPEC expects 2019 global oil demand growth to slow to 1.29 million bpd from 1.5 million in 2018

LONDON: OPEC said on Thursday it had cut oil output sharply in December before a new accord to limit supply took effect, suggesting producers have made a strong start to averting a glut in 2019 as a slowing economy curbs demand.
The Organization of the Petroleum Exporting Countries said in a monthly report its oil output fell by 751,000 barrels per day (bpd) in December to 31.58 million bpd, the biggest month-on-month drop in almost two years.
Worried by a drop in oil prices and rising supplies, OPEC and its allies, including Russia, agreed in December to return to production cuts in 2019. They pledged to lower output by 1.2 million bpd, of which OPEC’s share is 800,000 bpd.
The reduction in December means that should OPEC fully implement the new Jan. 1 cut, it will avoid a surplus that could weaken prices. Oil slid from $86 a barrel in October to below $50 in December on concerns of excess supply.
OPEC expects 2019 global oil demand growth to slow to 1.29 million bpd from 1.5 million in 2018 although it was more upbeat about the economic backdrop than last month and cited better sentiment in the oil market, where crude is back above $60.
“While the economic risk remains skewed to the downside, the likelihood of a moderation in monetary tightening is expected to slow the decelerating economic growth trend in 2019,” OPEC said.
“This has recently been reflected in global financial markets. The positive effect on market sentiment was also witnessed in the oil market,” it said.
The supply cut was a policy U-turn after the producer alliance known as OPEC+ agreed in June 2018 to boost supply amid pressure from US President Donald Trump to lower prices and cover an expected shortfall in Iranian exports.
OPEC changed course after the slide in prices starting in October. A previous OPEC+ supply curb starting in January 2017 — when OPEC production fell by 890,000 bpd according to OPEC figures — got rid of a glut formed in 2014-2016.
In a sign of excess supply, OPEC’s report said oil inventories in developed economies had stayed above the five-year average in November.
The biggest drop in OPEC supply last month came from Saudi Arabia and amounted to 468,000 bpd, the survey showed.
Saudi supply in November had hit a record above 11 million bpd.
The Kingdom told OPEC it lowered supply to 10.64 million bpd in December and has said it plans to go even further in January by delivering a larger cut than required under the OPEC+ deal.
The second-largest was an involuntary cut by Libya, where unrest led to the shutdown of the country’s biggest oilfield.
Output from Iran posted the third-largest decline, also involuntary, as US sanctions that started in November discouraged companies from buying its oil.
Iran, Libya and Venezuela are exempt from the 2019 supply cut deal and are expected by some analysts to post further falls, giving a tailwind to the voluntary effort by the others.
OPEC said in the report that 2019 demand for its crude would decline to 30.83 million bpd, a drop of 910,000 bpd from 2018, as rivals pump more and the slowing economy curbs demand.
Delivering the 800,000 bpd cut from December’s level should mean the group would be pumping slightly less than the expected demand for its crude this year and so avoid a surplus. Last month’s report had pointed to a surplus.
The figures for OPEC production and demand for its crude were lowered by about 600,000 bpd to reflect Qatar’s exit from the group, which now has 14 members.