Cost reduction measures continue at Fugro, as the company plans to further reduce its workforce and fleet in the remainder of 2016.
Image from Fugro.
During 1H 2016, Fugro cut its headcount by 585, with a total number of reductions expected to reach 1000 for 2016, the company revealed in its report. Fugro's global headcount currently stands 12,000, according to its website.
“Including last year’s reduction of 1577, personnel has by now been reduced by more than 15% in total and by around 35% in the businesses most exposed to the oil and gas market,” Fugro said.
Year-to-date, the company’s active fleet was further reduced by five vessels. Fugro said that for the remainder of the year, more reductions will be made as needed.
Fugro also disclosed a signed agreement that largely exits the company from the marine construction and installation market by divesting
its Asia Pacific subsea services business. The deal, part of company’s strategy to focus on its core geotechnical and survey activities, was signed today (4 August).
“I am pleased that we reached an agreement on the divestment of our Asia Pacific subsea business,” Paul van Riel, Fugro CEO said. “That fits in our strategy to focus on our core business while the minority stake we obtain in the acquiring entity allows us to participate in the benefits once the market recovers.”
Also underway is the combination of the company’s geophysical survey and offshore geotechnical activities into one integrated site characterization proposition.
“In the first half of this year, budgets of our oil and gas clients again declined significantly, with new projects being deferred or cancelled and strong price pressure as a result of overcapacity,” van Riel said. “We are continuing to adjust our cost base and capacity to market reality. This enables us to largely counter the lower volumes; the strong rate reductions, however, result in severe margin pressure.”
Fugro’s total revenue in 1H fell by 24.5% to US$1 billion (€905 million) from 1H 2015’s $1.3 billion (€1.2 billion).
Fugro’s geoscience unit saw the biggest drop at 47.5%, followed by its subsea services unit at 35.7%.
Its geotechnical unit dropped by 17.7%, in which Fugro attributed the decrease to the continuing decline in demand for site characterization services in the oil and gas sector.
Revenue for the survey division, which fell 21%, was well below last year mainly due to a reduction in seasonal positioning services and construction support activity and lower rates for geophysical work, Fugro said.
“The price reductions and efficiency gains throughout the supply chain are significantly lowering the oil price required to justify investments. In combination with increasing evidence that a balance between oil supply and demand will be achieved in the course of next year, this is expected to spur project approvals, also in a lower oil price environment,” van Riel said. “It is, however, still uncertain when this will have positive impact on our business.”