Baker Hughes Q2 Profit Down 45%

(RTTNews) - Oilfield services provider Baker Hughes Inc. (BHI) on Friday reported a 45 percent decline in profit for the second quarter as weak operating margins in North America and one-time charges more than offset an increase in revenues. The company also recorded weak performance in Latin America. Earnings per share missed analysts' expectations, while revenues beat their estimates.

Martin Craighead, Chairman & Chief Executive Officer of Baker Hughes said, "Activity levels continued to rise across the Eastern Hemisphere based on strong demand in deepwater markets, particularly in Europe and Africa, as well as seasonal improvements in Russia. However, our gains in the East were more than offset by a sharp decline in Latin America resulting from reduced activity and demobilization costs in Brazil and Mexico."

North America segment revenue edged up less than 1 percent to $2.68 billion, while Latin America revenue declined 8 percent to $557 million. Europe/Africa/Russia Caspian revenue grew 4 percent to $966 million and Middle East/Asia Pacific revenue increased 21 percent to $971 million. Industrial Services and Other revenue declined 2 percent to $316 million.

Profit before tax margin for North America declined to 8 percent from 13 percent in the same period last year. Margin for the company's total operations was 9 percent, down from 14 percent in the year-ago period.

Baker Hughes noted that its U.S. pressure pumping business continued to improve. The company added that with Canada returning to normal activity levels, it sees a strong rebound in operating margins in the third quarter for North America.

Net income attributable to Baker Hughes for the second quarter was $240 million or $0.54 per share, down from $439 million or $1.00 per share in the year-ago period.

The latest quarter's results includes after-tax charges of $20 million or $0.05 per share for bad debt provisions in Latin America and $7 million or $0.02 per share for an inventory charge related to certain proppants used in pressure pumping in North America.

On average, 32 analysts polled by Thomson Reuters expected the company to report earnings of $0.65 per share for the quarter. Analysts' estimates typically exclude one-time items.

Revenue for the quarter rose 3 percent to $5.49 billion from $5.33 billion in the year-ago period. Analysts had a consensus revenue estimate for the quarter of $5.26 billion.

Total costs and expenses increased 6 percent to $5.05 billion from $4.78 billion in the previous-year quarter.

Craighead said that during the second quarter, Baker Hughes began taking actions to reduce costs in its Latin America operations. The company expects the process to be substantially completed in the third quarter leading to increased profitability in the second half of the year.

In Friday's regular trading session, BHI is trading at $47.40, down $1.68 or 3.42 percent on a volume of 151,206 shares.