WorleyParsons' Fiscal 2013 Earnings Down as Expected but on Track for a Recovery in 2014

WorleyParsons reported a 7% fall in fiscal 2013 net profit after tax (NPAT) to AUD 322 million, in line with our forecast and at the low end of the May guidance range. The result reflected weakness in the mining sector, particularly due to a reduction in project spending in Australia, which offset a solid performance by the core hydrocarbons division. We marginally lower our fiscal 2014 and medium-term forecasts to make further allowance for continuation of the challenging mining environment, but still forecast a strong earnings recovery. Our fair value estimate falls from AUD 23 to AUD 22. We retain our positive view of the medium-term outlook, driven by the favourable outlook for capital spending in the oil and gas sector. However, we believe this is already priced in with the shares trading around fair value.