Aggreko warned yesterday that its profits are set to take a 25 per cent hit this year as European customers cut back on maintenance spends.
The news, the industrial equipment rental company's second profits warning in a year, sent its shares plummeting by more than 17 per cent to close at 137p, down 29p on the day. The group told investors last June that profits for 2002 would be about 15 per cent down and yesterday said its 2003 profits were likely to be about 25 per cent below last year's.
Aggreko rents out electrical generators, temperature-control and air-conditioning units, but Philip Rogerson, the chairman, said it had been hurt by a reduction in large maintenance projects from utilities groups. These usually provide Aggreko, which supplies temporary power and temperature-control equipment during the project, with high-margin business.
Mr Rogerson could not even reassure the City the worst of the bad news was over. "It is difficult to quantify with any real certainty the final outcome for the year," he said. The key trading period for the company is over the summer, but he said he was not expecting any "marked improvement". Without the effects of the weak dollar and comparisons with last year's one-off business from the Winter Olympics and the World Cup, Aggreko expects its underlying profits to be 15 per cent below its 2002 results.
The company has been struggling with an oversupply of rental equipment in North America that has deflated prices, but shareholders were shocked to discover how bad business has been in Europe, where Aggreko wins a third of its business. Trading in Holland had been particularly difficult.
Paul Steegers, an analyst at Merrill Lynch said: "It has quite clearly been a disastrous profit warning yet again. The extent of the downgrade in profits is more than we had expected. Aggreko is very sensitive to economic conditions, but there is currently no visibility on this stock."Reuse content