Shares of Worleyparsons Limited (ASX: WOR) have fallen more than 11% today following the release of a profit sensitive announcement this morning.
In an ASX market release WorleyParsons said plunging commodity prices have led to a "deterioration in workload since February," particularly in North America.
The company said its 2015 financial year profits will be impacted by non-recurring redundancy and general project provisions totalling $125 million.
"WorleyParsons is taking further action to adjust its business to market conditions," the company's ASX release stated. "It includes an expected reduction in employee numbers of more than 2,000 and associated onerous lease costs."
Shares in the company recently entered a trading halt after its board identified "non-recurring charges impacting the financial year 2015″.
As a result of these provisions the company says benefits will flow through to the 2016 financial year with annualised savings between $75 and $100 million.
However, after announcing a 7% fall in first half profits to $104.3 million in February, WorleyParsons says statutory profit for the second half of this financial year will be approximately 50% lower than the first half (i.e. a full year profit of approximately $156 million).
Are WorleyParsons shares a bargain?
At today's prices of $10.24 per share, taking into account today's provisions and 2015's guidance, I estimate WorleyParsons is currently trading at a forecast price-earnings ratio of around 18 times. In my opinion today's profit reduction is yet another reminder of why it's imperative to focus on the future, not on trailing or historical valuation figures.
Indeed whilst WorleyParsons shares are down 37% for the year, it would take a brave long-term investor to bet on a turnaround in the company's fortunes anytime soon. Tough market conditions are expected to prevail many years into the future, as commodity prices continue to fall in the wake of China's unprecedented infrastructure-led economic boom and oversupply from key oil producers.