Scottish temporary power firm Aggreko yesterday said it would cut its global workforce by almost 7% as part of a reorganisation prompted by “challenging market conditions”.
The announcement came after the Glasgow-based company reported a slide in earnings for the first half of 2015, following on from a profits warning it issued last month.
And the firm expects trading conditions to be tough into next year, citing low oil prices and geopolitical instability in key markets.
Aggreko, which supplied rental power at the Commonwealth Games in Glasgow and the Ryder Cup in Gleneagles in 2014, has split its operations across two divisions – power solutions and rental solutions.
Six hundred of Aggreko’s 8,300 employees will be laid off, though the firm said the impact on its Scotland-based workforce will be minimal.
In fact, Aggreko will beef up its engineering resources at its Dumbarton manufacturing facility during the reorganisation.
It has also found a way to save £80million over the next two years, which it plans to reinvest.
Aggreko said the reorganisation took effect at the start of August.
Jefferies analysts said: “The strategy suggests a better growth and returns profile but in the near to medium term it is likely to get worse due to difficult end-markets and actions taken by Aggreko to drive efficiencies.”
Aggreko’s North American operations have been hit by an ongoing decline in shale basins, while its Gulf of Mexico oil and gas business has lost out on work amid the energy sector downturn.
Security challenges in Yemen have impacted Aggreko’s ability to operate at full capacity there, while the terms of the company’s gas contract extensions in Bangladesh turned out less favourable than expected.
The company recorded pre-tax profits of £102million in the first half, down 21% year-on-year, on revenues of £780million.
The value of its shares was down by more than 3% as of mid-afternoon yesterday.
Aggreko chief executive Chris Weston, said: “It is clear that although the market environment has changed, our business model is sound and we have good growth opportunities in each of our markets.”
Mr Weston reiterated Aggreko’s expectation of pre-tax profits of £250million to £270million for the full year. It made £290million last year.
Aggreko has supplied power in the past for Glastonbury music festivals, Fifa World Cups, Olympic Games, US presidential inaugurations and Eurovision Song Contests.
It will provide services at the SPE Offshore Europe event at the Aberdeen Exhibition and Conference Centre in September.
The company has about 500 staff members in Scotland.