Aggreko warns of another tough year while it restructures

(Adds CFO comment)

By Li-mei Hoang

LONDON, Aug 6 (Reuters) - Britain's Aggreko (LSE: AGK.L - news) said its markets were likely to remain difficult in 2016 as it adapts the business to cope with weaker oil and gas markets and geopolitical uncertainty.

Still reeling from a profit warning last month, the world's largest temporary power provider said on Thursday its "margins and returns are likely to be lower in the short term".

"2016 will be assumed to be roughly flat on 2015," Chief Financial Officer Carole Cran said.

The group, which provides generators for major public events and industry users as well as serving electrical utilities wanting to fill supply gaps, cut its 2015 pretax profit forecast by up to 15 percent last month.

On Thursday it posted a 21 percent fall in pretax profit for the first half of its financial year to 102 million pounds ($159.16 million). Shares (Berlin: DI6.BE - news) , which have lost more than a fifth of their value this year, were down 1.6 percent at 1168 pence by 1034 GMT.

"The market environment that Aggreko faces has changed significantly in recent years and the company needs to adapt to the new landscape and maximise the opportunities available," Chief Executive Chris Weston told reporters.

Aggreko has been hit in its North American business by the falling oil price, which has resulted in declining activity and less equipment being hired by oil companies.

It also said security challenges in Yemen meant it could not operate all of its generators and equipment, while in Bangladesh the terms of a temporary power supply contract extension were not as favourable as it had hoped.

It has now reorganised into two units - Power Solutions (Frankfurt: 1PS.F - news) and Rental Solutions - and identified 80 million pounds of cost savings that will be found by 2017, which will be reinvested.

Weston, who became CEO in January, said the cost savings would come from improvements in areas like procurement and he expected demand from its divisions like power projects to help offset the uncertainty in oil and gas markets.

"There is a gap between the demand for the power and the supply for power and that really plays to our sweet spot .. We expect that gap to continue growing at about 6 percent per annum for the next five years," he said.

Aggreko expects 2015 full-year profit before tax between 250 million pounds and 270 million pounds at current exchange rates, compared with 289 million pounds a year earlier.

The company, which employs around 8,300 people in 100 countries, said the organisational changes would result in around 600 job losses globally.

"The strategy suggests a better growth and returns profile but in the near to medium term it is likely to get worse due to difficult end-markets and actions taken by Aggreko to drive efficiencies," Jefferies analysts said in a note. ($1 = 0.6409 pounds) (Editing by Greg Mahlich and Susan Thomas)