Energy
services sector, expansion continues
The Trinidad Guardian
Port Spain
Petroleumworldtt.com
03 25 07
The
energy services sector survey for the Q4 of 2006
indicates a continuation of the overall positive
expansionary trend that was observed in the second
and third quarters of 2006.
All
the major indicators of the survey indicate that
the energy services sector is benefiting from the
increase in activity in the wider energy sector.
While this is a positive observation, there are
some constraints acting against the expansion of
the sector.
Value
and volume of business
Forty-five
per cent of respondents indicated that in value
terms, business was above normal in Q4 2006. This
is an increase over the same measure in Q3 2006
which was 29 per cent. In terms of volume of business,
41per cent respondents indicated that this was above
normal while the same percentage said that it was
normal. These are about the same percentages reported
in Q3 2006.
Respondents
were asked to gauge the value and volume of business
they anticipated in the next three months. This
would mean the first quarter of 2007 (Q1 2007).
In
terms of value of business in the next 3 months,
60per cent of respondents said that they anticipated
business in value terms to increase in Q1 2007.
This is a significant increase when compared against
the 16 per cent that was reported in Q3 2006. This
indicates businessmen anticipating increased levels
of business in value terms in Q1 2007.
Thirty
per cent of respondents, however, indicated that
they anticipated no change to business in value
terms in Q1 2007. With respect to volume of business
anticipated in the next three months (Q1 2007) a
positive trend is again observed. Seventy per cent
of respondents expected Q1 2007 to bring an increase
in their volume of business. This is a significant
increase over the same metric that was reported
in Q3 2006 which was 25 per cent.
Average
selling price
Twenty-nine
per cent of respondents indicated that the average
selling price increased in Q4 2006 while 62 per
cent of respondents reported no change. Thirty-five
per cent of respondents indicated that they expected
average selling prices to increase in Q1 2007. These
trends are indicative of the general inflationary
pressure in the T&T economy which reached double
digits in the quarter under review.
Average
commission/ fees/ charges
Twenty-four
per cent of respondents indicated that average commission/
fees/ charges increased in the past three months
(Q4 2006) while 48per cent of respondents reported
that it stayed the same. The remaining 15 per cent
indicated that it was not applicable to them. Notably
the amount of respondents indicating an increase
in average commission/ fees/ charges in Q 3 2006
was lower at ten per cent. When asked to assess
the same metric in the next three months (Q1 2007),
35 per cent of respondents said that they expected
it to increase. This is a significant increase when
compared to the figure that was reported in the
ESSS report for Q3 2006 which was five per cent.
Once again these results are in sync with the prevailing
economic environment in T&T which has seen business-to-business
transactions increase in cost.
Total
costs per
person
employed
Sixty
two per cent of respondents indicated that their
cost per employee ratio (CPE) increased in Q4 2006
while 38 per cent said that it remained the same.
This compares to 53 per cent and 42 per cent for
Q3 2006. Sixty per cent of respondents said that
they expected this ratio to increase in the next
three months (Q1 2007). The increase in this ratio
is indicative of the increasing cost of producing
goods and services which is related to the increasing
cost of labour and materials.
Overall
profitability
Overall
profitability is one of the more direct indicators
of the health of a business. In Q4 2006, 14per cent
of respondents indicated that they had an increase
in overall profitability while 48 per cent said
that profitability had stayed the same in that period.
The largest percentage (48 per cent) said that profitability
decreased in Q4 2006. These results could be due
to the high cost of doing business which would cancel
that increases in business volume that were reported.
When
asked to say what they anticipated for the next
three months (Q1 2007) respondents were a bit more
optimistic with 30 per cent reporting that they
expected an increase in profitability and 45 per
cent expecting no change.
Employment/training
With
respect to employment 40 per cent of respondents
reported an increase in numbers employed in the
Q4 2006. The same percentage said that there was
no change in the number of employees in their companies.
When asked to give an indication of their expectations
for employment levels in the next three months (Q1
2007), 80 per cent of respondents said that they
anticipated an increase in the number of employees
in their respective organisations.
This
is an indication of the overall expansion of businesses
in the energy service sector.
A
similar trend was observed with respect to expenditure
on training and retraining. Fifty-five per cent
of respondents said that levels of training expenditure
increased in Q4 2006.
Capital
expenditure
Trends
in capital expenditure are also very positive with
50 per cent of respondents saying that they expected
to authorise more capital expenditure in the next
12 months on land and building than they did in
the previous 12 months. With respect to information
technology, 90 per cent of respondents said that
they expect to authorise more capital expenditure
in the next 12 months than they did in the previous
12 months.
The
most impressive figure, however, was reported for
“plant, machinery and vehicles.” In
this category of capital expenditure, 100 per cent
of respondents said that they would authorise more
capital expenditure in the next 12 months than they
did in the previous 12 months.
The
main reasons proffered for capital expenditure authorisations
in the next 12 months are: to increase efficiency;
to reach new customers; to expand capacity and to
provide new services. The main factors likely to
limit capital expenditure in the next 12 months
include: uncertainty about demand/ business prospects
and shortage of labour.
Respondents
indicated that the main limiting factors to increasing
business in the next 12 months include: international
competition; level of demand/ sales; the availability
of technical staff; local competition and availability
of professional staff.
Respondents
were asked whether they intended to expand their
business in the next 12 months more than they did
in the past 12 months. Eighty-nine per cent of respondents
said that they intended to expand their business
in the next 12 months while 11 per cent said that
they did not plan to expand.
From
all indicators the energy services sector is in
an expansionary mode. While this is good news, a
number of constraints to this expansion have been
identified.
Constraints
Constraints
such as the cost of doing business and the availability
and cost of labour—both technical and professional—could
derail the advances made by the sector. Many of
these constraints are related to the rate of inflation
in the economy which peaked in Q4 2006. Local energy
services sector firms have also cited international
competition as a mitigating factor to increasing
business in the next 12 months.
Trinidad
Guardian
Thursday 15th March, 2007
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©2007 Trinidad Guardian. All Rights Reserved.
