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Shell takes axe to jobs as profits tumble

Daily Telegraph

Royal Dutch Shell has suffered a 70pc drop in profits and warned that demand for fuel is unlikely to recover in the near term as the global recession continues, forcing the oil company to seek cuts in costs and capital expenditure.

By Graham Ruddick
Published: 8:44AM BST 30 Jul 2009

Profits on a current cost of supplies basis, a key measure for Shell, fell 70pc to $2.3bn (£1.4bn) in the quarter to June, with Peter Voser, the chief executive, delivering a downbeat outlook for the industry.

“Our second quarter results were affected by the weak global economy,” he said. “This weakness is creating a difficult environment both in upstream and downstream.

“Energy demand is weak. There is excess capacity in the market, and industry costs remain high.”

The fall in profits and pessimistic forecast echo similar messages from rival BP earlier this week. This is primarily due to a sharp drop in the price of oil as a consequence of the global recession. It has fallen from a peak of $147 a barrel last summer to below $40, before recovering to above $60 at present.

“Conditions are likely to remain challenging for some time, and we are not banking on a quick recovery,” Mr Voser, who was announcing his first set of results as chief executive after replacing Jeroen van der Veer, added. “Shell is adapting to this new situation, and we must do more. We are sharpening our focus on delivery and affordability.

“The industry outlook remains a challenging one, despite the rally in oil prices in recent months. We are taking steps to improve our performance, to bridge the company, and our shareholders, into a period of significant growth in the coming years.”

Mr Voser has already overseen the introduction of a new restructuring programme in June, due to be completed by the end of the year, which includes a reduction of 20pc, or roughly 100 jobs, in senior management positions.

The Shell boss said the programme was only the “beginning” of changes at the Anglo-Dutch company and that “substantial further staff reductions are likely”. Not including currency gains, $700m of costs were taken out of the business in the first half

Shell also expects to reduce organic capital spending in 2010 by 10pc compared to 2009 to $28bn.

At the pre-tax level, Shell’s earnings fell 71pc to $5.8bn. For the half-year, this meant a 68pc decrease from $35.9bn to $11.6bn.

Despite the downturn, Shell said will increase its second quarter dividend by 5pc to 42 cents.

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