The Independent: Shell shocks analysts with 56pc plunge: Mr Moody-Stuart was given a rough ride by analysts about the "abysmal results" (ShellNews.net)
By Roland Gribben, Business Editor
6 November 1998
Shell is to accelerate its restructuring and cost cutting drive after shocking the market with a 56pc slump in third-quarter profits.
Mark Moody-Stuart, Shell's chairman, said yesterday the results showed the Anglo-Dutch giant had to move "further and faster than we have been doing".
He described the figures as disappointing. But analysts were more trenchant and felt they were "disastrous". Net income of $841m (£506m), down from just over $1.9 billion (£1.14 billion) a year ago, left analysts' predictions of $1.14 billion to $1.44 billion looking limp.
They immediately slashed full-year profit forecasts, while some budgeted for a standstill rather than an increase in the final dividend. The 33pc slide in oil prices and the impact of the recession in the Asia Pacific region had a devastating effect on most of the business, particularly chemicals, but British Petroleum, with a 35pc slide, and Exxon, with a 23pc fall, have showed they are weathering the oil storms better.
Mr Moody-Stuart was given a rough ride by analysts about the "abysmal results" as the shares dropped 21.5 to 354.5p. He told them: "We have to use the stimulus of these poor results and a difficult outlook to address costs, to focus our ongoing investment and re-evaluate our portfolio. While [we are] basically strong and diversified, there are significant underperforming areas which need to be fixed or eliminated."
Shell plans further rationalisation of its chemicals operation to form a more focused business. It says further plans for refinery closures on top of the shutdowns in the UK, American and Japan are "at an advanced stage".
There are further job cuts to come in addition to the 1,000 already announced in exploration and production operations. Mr Moody-Stuart said that the rapid pace of restructuring continues but he expressed caution about the overall outlook. He confirmed that Shell is considering a write-down of some assets in the fourth quarter.
Shell is reviewing plans based on an oil price of $12 to $16 a barrel because of the continuing weakness in the market. It plans a further statement next month. The current cost reduction and portfolio restructuring programme is expected to produce savings of $600m a year. Shell says it expects to spend $600m on beating the millennium bug.
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