56% drop in profits at Shell stuns City

Historic accord with North Sea oil workers' unions agreed as further job cuts are predicted at Shell
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The Independent Online
SHELL, the oil giant, shocked the City yesterday with a dismal set of earnings that increased pressure on its management to cut staff and sell underperforming operations.

A slump in the oil price and the Asian crisis savaged earnings in the chemicals and fuels divisions and caused a 56 per cent collapse in the Anglo-Dutch group's third-quarter earnings to $841m (pounds 526m).

The performance was so poor that it failed to meet even the most pessimistic City analysts' forecasts, pitched at around $1.13bn.

The figures prompted analysts to cut their forecasts for the year and triggered a slide in the share price, which ended the day 21.5p lower at 354.5p, wiping more than pounds 2bn from the company's market value.

Industry experts were scathing about Shell's third-quarter showing. "It is absolutely appalling. They have lost an awful lot of credibility and it is a very acute embarrassment for them," said John Toalster at SG Securities.

Mark Moody-Stuart, the Shell chairman, said the results were "disappointing". He maintained that the group would have "to move further and faster than we have been doing" to put a halt to the profits' fall.

In a two-hour telephone conference with analysts, the chairman admitted that "there are significant underperforming areas which need to be fixed or eliminated".

He said "firm action" would be required to refocus the ailing chemicals division on fewer products and to prop up the US production and gas divisions.

Analysts are expecting a radical programme of disposals and refinery closures to be announced by the end of the year. They predicted another swingeing round of cuts to the group's worldwide workforce on top of the 4,000 redundancies announced in September. A raft of asset writedowns is also on the cards.

The company said that the chemical division was hit hard by tough trading conditions in Asia, an area where Shell has expanded more than most rivals.

Chemical earnings in the third quarter fell 90 per cent to $27m and the company said it expected Asian markets to deteriorate further in the remainder of the year.

A slump in the oil price was behind a 76 per cent plunge in profits of the exploration and production division. Brent crude prices remained almost 50 per cent below the level reached a year ago.

The company said that production cuts agreed by the OPEC cartel of producing countries in June had been largely offset by increased output from Iraq, following the relaxation of United Nations sanctions.

Investment, page 25

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