Aker Solutions — Investor Presentation 2016

Jul 13, 2016

2Q16

Fornebu, July 13, 2016 Luis Araujo and Svein Stoknes

© 2016 Aker Solutions |

Agenda | 2Q 2016

Introduction

Luis Araujo Chief Executive Officer

Financials Svein Stoknes Chief Financial Officer

Q&A Session

Luis Araujo Svein Stoknes

Key Developments | 2Q 2016

• Major projects progress as planned
• Steady margins year-on-year
• Top line weakens on global market decline

Good progress on global operational improvement program

• Solid financial position with liquidity buffer of NOK 7.9 billion

• Subsea alliance with ABB formed in April

• Robust order backlog of NOK 35 billion

• New orders secured in all business areas

• Key engineering agreement with Lundin Norway

• Subsea wins contract for its longest-ever umbilical for Egypt's Zohr field

• MMO wins orders in Norway
• FEED contract from Idemitsu Oil and Gas for offshore Vietnam developments

Key Figures | 2Q 2016

Global Improvement Program – #thejourney

Targeting minimum 30 percent improvement in cost-efficiency across company and building culture of continuous improvement

Simplifying work methods, organizational set-up, geographic footprint and products and services

Leaner and more efficient processes that reduce overall costs of projects and products while boosting quality

Collaborations From Reservoir to Topside

Outlook

• Market uncertainty persists amid concern over capital, oil prices
• Commercial environment still tough
• Steady tendering in key markets, though seeing projects postponed
• Norway market seen subdued this year, may see gradual recovery from 2017
• Lower break-even costs may spur project sanctions in next 12-18 months
• Robust order backlog and growing international presence
• Vigilant about costs and capacity
• Well placed to capture long-term, global deepwater and subsea market growth

Agenda | 2Q 2016

Introduction Luis Araujo Chief Executive Officer

Financials

Svein Stoknes Chief Financial Officer

Q&A Session

Luis Araujo Svein Stoknes

2Q 2016 | Income Statement

• Revenue for 2Q 2016 down 13% versus 2Q last year, reflecting project phasing and lower order intake
• Underlying 2Q 2016 EBITDA reached NOK 590 million, a margin of 8.5% versus 8.1% a year earlier

(NOK million)	2Q 2016	2Q 2015	1H 2016	1H 2015
Revenue	6,969	8,048	13,432	16,548
EBITDA	563	547	1,072	1,138
EBITDA margin	8.1%	6.8%	8.0%	6.9%
EBITDA (excl. special items) 1	590	647	1,111	1,312
EBITDA margin (excl. special items) 1	8.5%	8.1%	8.3%	8.0%
Depreciation, amortization and impairment	(245)	(171)	(440)	(354)
EBIT	319	376	632	784
EBIT margin	4.6%	4.7%	4.7%	4.7%
EBIT (excl. special items) 1	395	478	722	987
EBIT margin (excl. special items) 1	5.7%	6.0%	5.4%	6.0%
Net financial items	(95)	(106)	(154)	(188)
FX on disqualified hedging instruments	(25)	41	(22)	52
Income before tax	199	310	457	648
Income tax	(68)	(102)	(157)	(220)
Net income	131	209	300	428
Earnings per share (NOK)	0.37	0.73	0.90	1.52
Earnings per share (NOK) (excl. special items)1	0.66	0.91	1.22	1.94

1 Special items include costs linked to restructuring, onerous leases, the impact of currency derivatives not qualifying for hedge accounting, IT separation costs following the demerger, and impairment charges on technology and property in 2016. See first page of additional information section for details on special items.

2Q 2016 | Cashflow and Financial Position

• 2Q 2016 cashflow from operations was negative NOK 530 million, reflecting NCOA normalization
• Expect NCOA to move over time towards more normalized level of around NOK 1.5 billion
• Robust 2Q 2016 financial position with net debt of NOK 1.3 billion and gross debt NOK 4.3 billion; leverage and gearing well below target range
• Total liquidity buffer at NOK 7.9 billion from NOK 2.9 billion cash and NOK 5 billion RCF
• Group ROACE excluding impact from special items reached 13%, reflecting recent and ongoing investments

Debt maturity profile

NOK million

Note: Revolving credit facility of NOK 5 billion as at end 2Q 2016, drawn NOK 0 billion, maturing in 2019

Net current operating assets (NCOA) NOK million

Subsea

• Good progress on major projects, according to plan
• 2Q 2016 revenue down 12% vs. last year to NOK 4.3 billion
• 2Q 2016 EBITDA1 margin at 9.6%, slightly lower year-on-year
• 2Q 2016 EBIT1 margin decreased to 6.0% from 7.2% a year earlier
• 2Q 2016 order intake at NOK 2.2 billion, equivalent to 0.5x book-to-bill
• End 2Q 2016 order backlog at NOK 18.3 billion

Field Design

• Impacted by continued activity slowdown on the NCS
• 2Q 2016 revenue down 17% vs. last year to NOK 2.7 billion
• 2Q 2016 EBITDA1 margin of 7.4% driven by strong operational performance
• 2Q 2016 EBIT1 margins of 6.1%, up year-on-year from 4.9%
• 2Q 2016 order intake at NOK 1.3 billion, equivalent to 0.5x book-to-bill
• End 2Q 2016 order backlog at NOK 16.7 billion

Good Visibility From Substantial Order Backlog1

2Q 2016 Order backlog by execution date

NOK billion

Order backlog by business area

NOK billion

¹ Firm backlog only, excludes majority of service business and potential additional revenue from existing agreements and options

Order backlog and intake evolution

NOK billion

End 2Q 2016 order backlog by region

NOK billion

Financial Guidance

• Positive long-term offshore, deepwater outlook
• Near-term uncertainty on timing of awards
• Aim to at least maintain market share in main subsea, field design markets

Margins and returns

• We aim to gradually move toward peer group margin levels in Subsea
• We expect gradual recovery in Field Design
• We aim for Subsea ROACE of 20-25% over medium term

Revenue Balance sheet

• Capex and R&D ≈ 3% of revenue
• Current major capex investment plans to be finished in 2016
• Working capital: likely to fluctuate around large project work but on average will be ≈ 5-7% of group revenue

Financial policy

• Net interest-bearing debt/EBITDA ≈ 1
• Net interest-bearing debt/Equity < 0.5
• Dividend payments should over time amount to 30-50% of net profit

Agenda | 2Q 2016

Introduction Luis Araujo Chief Executive Officer

Financials Svein Stoknes Chief Financial Officer

Q&A Session

Luis Araujo Svein Stoknes

Additional information

Special items

NOK million
Special items (EBITDA)	1Q 2015	2Q 2015	3Q 2015	4Q 2015	FY 2015	1Q 2016	2Q 2016
Onerous leases1	52	58	40	114	265	-	4
Restructuring2	0	2	41	373	416	15	19
Non-qualifying hedges	18	36	25	15	94	-4	-11
Demerger and other costs4	4	4	4	11	22	3	15
Special items (EBIT)
Impairments3	26	3	11	123	163	-	50
Total	100	102	121	636	960	13	77

1) Onerous lease costs are included in the "other" segment and has not impacted the BA results

2) Restructuring cost in 2Q is mainly related to capacity adjustments outside Norway in Engineering (NOK 16 million) and MMO (NOK 2 million)

3) Impairments are related to Subsea (NOK 50 million) in 2Q

4) Demerger and other costs in 2Q contains IT separation costs related to demerger of NOK 2 million and a NOK 13 million loss related to the sale of our Sweden office

Income statement

NOK million
Income statement consolidated	2Q 2014	3Q 2014	4Q 2014	FY 2014	1Q 2015	2Q 2015	3Q 2015	4Q 2015	FY 2015	1Q 2016	2Q 2016
Revenue	8,060	8,274	9,155	32,971	8,500	8,048	7,484	7,864	31,896	6,463	6,969
EBITDA	608	615	786	2,675	591	547	521	182	1,841	508	563
Of which related to hedging	(25)	2	(91)	(86)	(18)	(36)	(25)	(15)	(94)	4	11
Depreciation, amortization and impairment	(136)	(156)	(228)	(665)	(183)	(171)	(192)	(337)	(882)	(195)	(245)
EBIT	472	460	557	2,010	409	376	329	(155)	958	314	319
Net financial items	(19)	(4)	(197)	(245)	(82)	(106)	(30)	(102)	(320)	(59)	(95)
Foreign exchange on disqualified hedging instruments	73	(32)	115	51	11	41	15	(21)	46	4	(25)
Net income (loss) before tax	526	424	476	1,817	338	310	315	(278)	685	258	199
Income tax	(137)	(154)	(117)	(516)	(118)	(102)	(110)	28	(302)	(89)	(68)
Net income (loss) for the period	388	270	359	1,300	220	209	205	(250)	383	169	131
EBITDA margin	7.5 %	7.4 %	8.6 %	8.1 %	7.0 %	6.8 %	7.0 %	2.3 %	5.8 %	7.9 %	8.1 %
Basic earnings per share (NOK)	1.41	0.97	1.30	4.71	0.79	0.73	0.75	-0.83	1.44	0.53	0.37

Balance sheet

NOK million
Assets	2Q 2014	3Q 2014	4Q 2014	1Q 2015	2Q 2015	3Q 2015	4Q 2015	1Q 2016	2Q 2016
Property, plant and equipment	3,180	3,203	3,603	3,586	3,754	3,792	3,962	3,882	3,934
Intangible assets	5,731	5,810	6,143	6,238	6,388	6,518	6,539	6,403	6,306
Financial assets (non-current)	23	17	17	17	17	17	16	16	16
IB receivables (non-current)	6	15	9	10	10	10	20	20	27
IB receivables (current)	-0	299	82	8	8	-	117	76	91
Other current assets	13,805	15,732	14,197	14,381	14,520	15,252	13,213	11,909	10,478
Cash and cash equivalents	4,009	1,064	3,339	2,816	1,958	2,651	3,862	3,497	2,861
Total assets	26,754	26,139	27,391	27,055	26,654	28,241	27,729	25,802	23,713
Debt and equity	2Q 2014	3Q 2014	4Q 2014	1Q 2015	2Q 2015	3Q 2015	4Q 2015	1Q 2016	2Q 2016
Total equity attributable to the parent	7,534	5,125	5,677	5,707	5,836	6,326	6,397	6,278	6,399
Non-controlling interests	175	186	216	239	241	253	234	249	278
Non IB liabilities (non-current)	1,922	1,662	1,391	1,338	1,445	1,472	881	833	805
Interest bearing debt (non-current)	3,710	3,652	3,154	3,142	3,685	3,122	3,137	3,343	1,934
Non IB liabilities (current)	13,396	15,298	16,279	16,049	15,356	16,584	16,520	14,444	11,965
Interest bearing current liabilities	17	216	674	581	91	483	561	655	2,332
Total liabilities and equity	26,754	26,139	27,391	27,055	26,654	28,241	27,729	25,802	23,713
Net current operating assets, excluding held for sale	336	880	-688	90	656	315	-1,607	-933	-100
Net interest bearing items	-288	2,491	397	889	1,801	943	-301	406	1,287
Equity	7,710	5,310	5,893	5,945	6,077	6,579	6,630	6,527	6,677
Equity ratio (in %)	28.8	20.3	21.5	22.0	22.8	23.3	23.9	25.3	28.2

Cashflow

2Q 2014	3Q 2014	4Q 2014	FY 2014	1Q 2015	2Q 2015	3Q 2015	4Q 2015	FY 2015	1Q 2016	2Q 2016
										563
										(1,094)
1,826	(351)	2,057	2,645	(414)	(80)	832	1,595	1,934	(327)	(530)
										(53)
										(65)
										(5)
										-
										(10)
(271)	(345)	(496)	(1,368)	(227)	(419)	(261)	(392)	(1,299)	(185)	(133)
										99
										-
6	(10)	(125)	(129)	65	(4)	9	(96)	(26)	36	(28)
(1,646)	(2,230)	462	(2,700)	95	(349)	2	(71)	(296)	274	71
										(43)
(38)	(2,935)	2,401	(994)	(523)	(859)	694	1,211	550	(366)	(636)
4,041	4,003	1,074	4,463	3,339	2,816	1,958	2,652	3,339	3,862	3,496
4,003	1,068	3,475	3,469	2,816	1,958	2,652	3,864	3,890	3,496	2,861
	587 1,239 (166) (115) - (15) 25 (3) (1,643) 53	617 (968) (203) (124) - - (18) 119 (2,349) (9)	785 1,271 (315) (195) - (36) 50 (170) 632 378	2,675 (30) (816) (554) - (51) 53 34 (2,734) 429	591 (1,005) (118) (109) - - (0) 31 - 22	547 (627) (297) (125) - - 3 49 (394) (10)	521 311 (165) (94) - - (1) (8) - 121	182 1,414 (261) (121) - (3) (7) 25 - 79	1,841 93 (841) (449) - (3) (5) 98 (394) 212	508 (836) (94) (93) - - 2 238 - (128)

Split per segment

NOK million
Revenues	2Q 2014	3Q 2014	4Q 2014	FY 2014	1Q 2015	2Q 2015	3Q 2015	4Q 2015	FY 2015	1Q 2016	2Q 2016
Subsea	4,672	5,054	5,461	19,293	5,077	4,820	4,452	4,752	19,101	3,864	4,264
Field Design	3,408	3,210	3,688	13,710	3,467	3,293	2,990	3,170	12,920	2,650	2,725
Other	31	62	90	205	41	50	104	79	273	25	48
Eliminations	(51)	(52)	(85)	(236)	(85)	(115)	(62)	(137)	(398)	(76)	(68)
Revenues	8,060	8,274	9,155	32,971	8,500	8,048	7,484	7,864	31,896	6,463	6,969

EBITDA	2Q 2014	3Q 2014	4Q 2014	FY 2014	1Q 2015	2Q 2015	3Q 2015	4Q 2015	FY 2015	1Q 2016	2Q 2016
Subsea	540	530	584	2,058	507	487	433	352	1,778	367	399
Field Design	143	174	293	868	183	190	170	(1)	543	162	182
Other	(75)	(88)	(91)	(252)	(99)	(130)	(82)	(169)	(480)	(21)	(18)
EBITDA	608	615	786	2,675	591	547	521	182	1,841	508	563

EBIT	2Q 2014	3Q 2014	4Q 2014	FY 2014	1Q 2015	2Q 2015	3Q 2015	4Q 2015	FY 2015	1Q 2016	2Q 2016
Subsea	425	399	417	1,536	353	344	278	70	1,045	213	194
Field Design	131	142	220	725	154	161	138	(50)	404	128	149
Other	(84)	(82)	(80)	(251)	(99)	(130)	(86)	(175)	(490)	(27)	(24)
EBIT	472	460	557	2,010	409	376	329	(155)	958	314	319

Split per segment

NCOA	2Q 2014	3Q 2014	4Q 2014	1Q 2015	2Q 2015	3Q 2015	4Q 2015	1Q 2016	2Q 2016
Subsea	327	742	(332)	18	724	611	(472)	(124)	640
Field Design	250	532	71	212	54	(238)	(861)	(538)	(456)
Other	(241)	(394)	(427)	(140)	(122)	(58)	(275)	(271)	(283)
NCOA	336	880	(688)	90	656	315	(1,607)	(933)	(100)

Net capital employed	2Q 2014	3Q 2014	4Q 2014	1Q 2015	2Q 2015	3Q 2015	4Q 2015	1Q 2016
Subsea	4,392	4,549	3,989	4,322	5,157	5,130	4,702	4,923
Field Design	(17)	299	11	384	206	(106)	(362)	(161)
Other	2,973	3,584	3,685	3,887	4,007	4,146	3,689	3,773
Net capital employed	7,347	8,432	7,685	8,593	9,370	9,170	8,029	8,535

Order intake	2Q 2014	3Q 2014	4Q 2014	FY 2014	1Q 2015	2Q 2015	3Q 2015	4Q 2015	FY 2015	1Q 2016	2Q 2016
Subsea	18,463	1,791	2,630	27,306	1,998	1,782	2,537	1,343	7,660	1,916	2,158
Field Design	2,993	1,859	3,539	9,899	7,045	1,657	1,444	5,118	15,263	4,129	1,264
Other	11	27	134	190	50	55	64	118	287	25	46
Eliminations	(59)	(50)	(100)	(260)	(81)	(58)	(88)	(191)	(418)	(74)	(67)
Order intake	21,408	3,626	6,203	37,135	9,012	3,436	3,957	6,388	22,793	5,996	3,400

Order backlog	2Q 2014	3Q 2014	4Q 2014	1Q 2015	2Q 2015	3Q 2015	4Q 2015	1Q 2016
Subsea	38,508	35,015	33,702	30,403	27,522	25,538	22,476	20,242
Field Design	15,376	14,035	14,609	17,927	16,453	15,131	17,235	18,275
Other	59	(70)	(15)	(6)	0	(42)	0	0
Eliminations	(21)	9	(6)	(3)	54	30	(27)	(25)
Order backlog	53,922	48,989	48,289	48,322	44,029	40,657	39,684	38,493

Copyright and Disclaimer

Copyright

Copyright of all published material including photographs, drawings and images in this document remains vested in Aker Solutions and third party contributors as appropriate. Accordingly, neither the whole nor any part of this document shall be reproduced in any form nor used in any manner without express prior permission and applicable acknowledgements. No trademark, copyright or other notice shall be altered or removed from any reproduction.

Disclaimer

This Presentation includes and is based, inter alia, on forward-looking information and statements that are subject to risks and uncertainties that could cause actual results to differ. These statements and this Presentation are based on current expectations, estimates and projections about global economic conditions, the economic conditions of the regions and industries that are major markets for Aker Solutions ASA and Aker Solutions ASA's (including subsidiaries and affiliates) lines of business. These expectations, estimates and projections are generally identifiable by statements containing words such as "expects", "believes", "estimates" or similar expressions. Important factors that could cause actual results to differ materially from those expectations include, among others, economic and market conditions in the geographic areas and industries that are or will be major markets for Aker Solutions' businesses, oil prices, market acceptance of new products and services, changes in governmental regulations, interest rates, fluctuations in currency exchange rates and such other factors as may be discussed from time to time in the Presentation. Although Aker Solutions ASA believes that its expectations and the Presentation are based upon reasonable assumptions, it can give no assurance that those expectations will be achieved or that the actual results will be as set out in the Presentation. Aker Solutions ASA is making no representation or warranty, expressed or implied, as to the accuracy, reliability or completeness of the Presentation, and neither Aker Solutions ASA nor any of its directors, officers or employees will have any liability to you or any other persons resulting from your use.

Aker Solutions consists of many legally independent entities, constituting their own separate identities. Aker Solutions is used as the common brand or trade mark for most of these entities. In this presentation we may sometimes use "Aker Solutions", "we" or "us" when we refer to Aker Solutions companies in general or where no useful purpose is served by identifying any particular Aker Solutions company.