Shares in Dutch geological data firm Fugro fell sharply on Tuesday, April 15, 2025, after the company issued a profit warning and cut its first-quarter revenue and earnings outlook. The company's stock was down more than 14% in Amsterdam trading as of 08:18 GMT, reflecting investor concerns over its financial performance amid challenging market conditions.
Fugro now expects its Q1 revenue to decline by approximately 11%, which translates to a drop from 503 million euros a year earlier. The company also projected that its first-quarter EBIT (earnings before interest and taxes) would be only slightly positive, a stark contrast to the 44 million euros reported during the same period in 2024.
According to Belgian brokerage KBC Securities, the profit warning was largely driven by a mismatch with market expectations. Analysts had anticipated a more modest revenue drop of 4.8%, following a robust 9% growth in Q1 last year. "It seems the intensified tariff war with coinciding uncertainty and a diving oil price is hindering investment decisions in the traditional energy markets and offshore wind markets outside the U.S. too," the firm noted.
In light of these developments, KBC analysts downgraded Fugro shares to Under Review from Buy, despite the company’s assurances regarding its full-year EBIT guidance. Fugro's CEO, Mark Heine, expressed confidence in the company's long-term strategy, stating, "By taking measures to protect our profitability, we remain convinced that we will achieve our EBIT margin target of 11 to 15 percent for the entire year of 2025." He emphasized the company's resilience and diversification, which he believes will allow Fugro to navigate these uncertain times effectively.
Fugro's profit warning comes amid rapidly increasing geopolitical and economic uncertainties that are influencing customer investment behaviors worldwide. The firm acknowledged that these factors contribute to challenges in the U.S. market, particularly in offshore wind energy, where investment decisions are being delayed or scaled back.
Additionally, Fugro expects a negative free cash flow of 85 million euros for the quarter, compared to a negative 58 million euros last year. The order portfolio for the next 12 months is projected to decline modestly by 3 to 4 percent year-on-year by the end of March.
Despite these setbacks, Fugro is taking proactive steps to implement cost-saving measures aimed at safeguarding its profitability and cash flow. The company plans to release its full quarterly figures on April 24, 2025, which will provide further insights into its financial health.
The market's reaction to Fugro's announcement was swift, with shares dropping by 14% shortly after trading began on Tuesday. This decline marked one of the worst trading days for Fugro since November 1, 2024, when its shares closed 16.2% lower.
Analysts are closely monitoring the situation, as KBC Securities has indicated that they will need to revise their earnings model significantly in light of the profit warning. Jefferies, another brokerage, echoed these sentiments, highlighting that the decline in Q1 revenue is partly due to a pause in new offshore wind projects in the U.S., which accounted for approximately 8% of Fugro's revenues in FY 2024. Furthermore, project scope reductions and slower award decisions are also impacting the company's performance.
As Fugro navigates these turbulent waters, the company's focus remains on maintaining profitability while adhering to its long-term strategic goals. The upcoming financial report is expected to shed light on how the company plans to adapt to the current market conditions and what steps it will take to reassure investors.
In summary, Fugro's recent profit warning and the subsequent drop in share prices illustrate the challenges faced by companies in the geological and energy sectors amid evolving economic landscapes. Investors will be looking for clarity in the company's upcoming financial disclosures, especially in light of the broader implications for the offshore wind market and traditional energy sectors.
