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Akastor — Earnings Release 2014
Jul 17, 2014
3525_rns_2014-07-17_552f903c-bf04-4acc-b2dd-375047865ebb.html
Earnings Release
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Aker Solutions Reports Second-Quarter 2014 Earnings Ahead of Split
Aker Solutions Reports Second-Quarter 2014 Earnings Ahead of Split
July 17, 2014 - Aker Solutions is on track with a plan to split into two
companies at the end of September, including one that will keep the current name
and be comprised of the Subsea, Umbilicals, Engineering, and Maintenance,
Modifications and Operations (MMO) areas. Pro forma second-quarter revenue for
the new Aker Solutions rose to NOK 8.1 billion from NOK 7.5 billion a year
earlier, helped by a 13 percent increase in sales of subsea equipment and
services. The new company's pro forma earnings before interest, taxes,
depreciation and amortization (EBITDA) increased to NOK 592 million in the
quarter from NOK 481 million a year earlier.
Pro forma revenue for the other company, which will be called Akastor and
include Drilling Technologies, Aker Oilfield Services, Process Systems, Surface
Products and Business Solutions, climbed 25 percent in the second quarter to NOK
6 billion. The company had a pro forma EBITDA loss of NOK 129 million in the
quarter versus a profit of NOK 303 million a year earlier. The earnings were
impacted by one-off items totaling NOK 451 million, including a previously
announced provision on the Aker Wayfarer, a vessel in the Aker Oilfield Services
unit.
"We've taken huge strides since announcing the split in April - putting in place
new management teams and structures for the two companies," said Øyvind Eriksen,
Aker Solutions' chairman. "Today we are also announcing the first pro forma
earnings figures for these companies."
New management structures were put in place this month as Luis Araujo, formerly
regional president for Aker Solutions in Brazil, on July 1 became chief
executive officer of the new Aker Solutions. Frank Ove Reite, formerly managing
partner at Converto, became CEO of Akastor. Øyvind Eriksen has been nominated as
chairman of the board of both the new Aker Solutions and Akastor.
Revenue at the current Aker Solutions rose 17 percent to NOK 13 billion in the
second quarter from NOK 11 billion a year earlier. EBITDA fell to NOK 429
million, compared with NOK 786 million a year earlier. The EBITDA margin
narrowed to 3.3 percent from 7.1 percent a year earlier. Earnings were impacted
by impairments and a provision totaling NOK 1.6 billion on assets and goodwill
of the Aker Oilfield Services business, which will be part of Akastor after the
split. Excluding one-off items, the margin was 7.5 percent in the second quarter
of 2014.
New Aker Solutions Margin
For the new Aker Solutions, excluding demerger costs and hedges not qualified
for hedging accounting, the pro forma EBITDA margin widened to 8 percent in the
quarter from 6.8 percent a year earlier, helped by improved operations at the
umbilicals plant in Norway, higher capacity utilization for Engineering and good
progress on key subsea and engineering projects, including the Johan Sverdrup
development. This was somewhat offset by weaker performance for MMO, which had
issues with some final project settlements and overcapacity caused by lower
demand for maintenance and modifications services offshore Norway.
The new Aker Solutions' order intake in the quarter rose to NOK 21.4 billion
from NOK 6.4 billion a year earlier, boosted by major subsea contract awards,
including a NOK 14 billion order from Total to deliver the subsea production
system for the Kaombo development offshore Angola. This brought the order
backlog to NOK 54 billion at the end of the quarter compared with NOK 41 billion
a year earlier.
"Subsea's order intake was at a record high in the quarter and our focus now is
on delivering successfully on these projects," Eriksen said. "We also took steps
in the quarter to adjust capacity in our Norwegian MMO business, which is being
affected by lower demand as oil companies reduce spending plans."
Aker Solutions started transferring employees to a new subsea engineering hub in
Stavanger and used the Aker Advantage recruitment agency to help more than 200
MMO employees find alternative work in the group or with other companies.
Akastor Margin
Akastor's EBITDA was impacted by one-off items totaling NOK 451 million,
including demerger costs and a provision on future lease commitments of the Aker
Wayfarer vessel. There were also gains on hedging, not-booked mobilization fees
and a gain from the sale of shares in Expo Hotel Fornebu. Excluding these one-
off items, Akastor had a pro forma EBITDA margin of 5.8 percent in the quarter
versus 6.4 percent in the same period last year.
Earnings before interest and taxes (EBIT) were also impacted by NOK 996 million
in writedowns of assets in Aker Oilfield Services. Akastor had a pro forma EBIT
loss of NOK 1.4 billion in the quarter, compared with a loss of NOK 247 million
a year earlier.
The company's order intake decreased to NOK 4.6 billion in the quarter from NOK
5 billion a year earlier as Drilling Technologies won fewer contracts amid an
oversupply of drilling rigs that caused rig operators to put new projects on
hold. The backlog amounted to NOK 13.9 billion at the end of the quarter,
compared with NOK 15.8 billion a year earlier.
Outlook
"In the new Aker Solutions, the favorable trend continues for the subsea,
umbilicals and engineering businesses, while the MMO business in Norway faces a
continued challenging market over the next couple of years," Eriksen said.
"Capital discipline is currently the most important driver for exploration and
production companies and is expected to remain tight over the next 1 to 2 years
after which we anticipate the next wave of projects," Eriksen said. "Our job is
to balance short term capacity adjustments with positioning ourselves for the
next wave of field developments."
The new Aker Solutions is well-positioned in the fast-growing deepwater and
subsea segments and sees opportunities for further growth in markets including
Brazil, the North Sea, Atlantic Canada, Mexico, Angola and West Africa.
The new Aker Solutions' high order backlog gives confidence in a robust medium-
term outlook. Key wins in Brazil, Angola and Norway, including the Kaombo and
Johan Sverdrup contracts, also bolster the longer term outlook for the company.
Akastor's portfolio of businesses provides opportunities for growth in key
markets across the world from West Africa to Saudi Arabia and to Southeast Asia.
Drilling Technologies, the world's second-largest offshore drilling systems and
life-cycle services company, is expected to benefit from growing demand for
services on its installed base of equipment.
"Each Akastor business will be developed independently to unlock its full
potential, be it through organic growth, strategic partnerships or M&A
activity," Eriksen said. "An allocation strategy should be developed at an
early stage to make sure the capital invested yields the best shareholder
returns possible."
ENDS
For further information, please contact:
Media:
Bunny Nooryani, Chief Communications Officer, Aker Solutions. Tel:
+47 67 59 42 71, Mob: +47 480 27 575, E-mail: [email protected]
Investor relations:
David Phillips, Head of Industry & Investor Relations, Aker Solutions. Tel:
+44 20 8811 9111, Mob: +44 7788 338 887, E-mail:
Lasse Torkildsen, SVP Investor Relations, Aker Solutions. Tel: +47 67 51 30 39,
Mob: +47 911 37 194, E-mail: [email protected]
Suppliers:
For further information about sourcing and potential subcontracts for this
project, please visit www.akersolutions.com/suppliers
Career opportunities:
Visit http://www.akersolutions.com/careers
Aker Solutions is a global provider of products, systems and services to the oil
and gas industry. Our engineering, design and technology bring discoveries into
production and maximize recovery from each petroleum field. We employ
approximately 28,000 people in about 30 countries. Go to www.akersolutions.com
for more information on our business, people and values.
This press release may include forward-looking information or statements and is
subject to our disclaimer, see www.akersolutions.com.
This information is subject of the disclosure requirements pursuant to section
5-12 of the Norwegian Securities Trading Act.
[HUG#1828272]