Wednesday, October 28, 2020

Energy firm John Wood expects bribery probe to cost $46 million

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John Wood Group expects to pay $46 million to settle an investigation into allegations of bribery in Brazil, the company has revealed.

The Aberdeen-based engineering giant had been probed by the authorities in the south American country, the US and the Scottish Crown Office over claims of illegal payments to agents when dealing with the oil company Unaoil in Brazil.

The allegations involve Amec Foster Wheeler and predate Wood’s takeover of the company in 2017. Wood said it had carried out an internal investigation which found that payments were made to agents in Brazil. It said was cooperating with the authorities in each country and did not rule out criminal charges.

Wood stated in its final results for 2019: “Discussions concerning possible resolutions of the investigations by the authorities in the US, Brazil and Scotland have progressed to the point where the Group believes that it is likely to be able to settle the relevant matters with these authorities at an aggregate cost of approximately $46 million.

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“This amount is reflected as a provision in the financial statements as described in note 20. The Group could also face further potential civil and criminal consequences in relation to the investigation by the SFO.”

Meanwhile in its results for the 12 months to 31 December, 2019, Wood promised to continue to refocus on the sustainable energy sector and cut its debts after a year in which profits increased by 15%.

Itt posted revenues down 1.2% to $9.89 billion but saw pre-exceptional operating profits rise to $411 billion, in line with expectations.

Chairman Roy Franklin said: “In a world where environmental concerns have moved swiftly to the top of the global agenda, the future will be very different from the past. Wood’s sustainability strategy is fundamental to the long-term success of the business and is aligned to the UN Sustainable Development Goals.

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“In addition, decisive action taken over recent years has ensured Wood is well placed to be part of the solution to these challenges with a business strategy focused on helping to secure the energy transition and deliver sustainable infrastructure solutions. This will be supported by a continued focus on margin improvement, execution excellence and portfolio optimisation in 2020. Looking further ahead, there is a positive medium term outlook for Wood’s end markets and the Board is confident in the leadership teams’ ability to deliver organic and acquisition led growth.”

Wood said its order book had been pared back with the sale of its industrial services and nuclear businesses this month, and forecast modest underlying revenue growth and growth in underlying EBITDA.

However, it said it was too early to quantify the impact of Covid-19 in the year ahead. But it stated diversification strategy meant upstream and midstream oil and gas represented only 35% of revenue. The report was written before the plunge in oil prices on Monday which in turn caused carnage in stock markets worldwide.

Chief executive Robin Watson said: “We are strategically positioned for a new future with the capabilities to help secure the energy transition and deliver sustainable infrastructure solutions. We have leading market positions that enable us to deliver the solutions necessary to solve some of the world’s biggest challenges. With this model we are able to attract premium work, at the right margin, allowing us to enhance our profitability and grow; making for an even more attractive investment proposition.”

David Barclay, head of office at Brewin Dolphin Aberdeen, said: “Wood has delivered a robust set of results against a challenging 12 months for the business. The company has taken proactive steps to broaden its offering and focussed on debt reduction, supported by a targeted divestment programme.

“The benefits of its merger with Amec Foster Wheeler are still filtering through and there are more challenges ahead – not least the plunge in oil prices of the last few days – but Wood has relatively good visibility over future revenues and is in a decent position to grow in its other markets, while keeping leverage under control.”

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