Aker Makes Less, Revenue Up

Aker Solutions’ third-quarter attributable profit dropped to NOK 265 from NOK 349. Earnings per share fell to NOK 0.97 from NOK 1.29 a year earlier.

However, Aker’s revenue rose 22 percent to NOK 8.3 billion in the third quarter of 2014, boosted by increased work at major subsea projects in Norway and West Africa, higher activity at the U.S. umbilicals plant and rising engineering sales.

Earnings before interest and taxes (EBIT) climbed to NOK 460 million from NOK 451 million a year earlier. The EBIT margin in the same period narrowed to 5.6 percent from 6.6 percent. Margins were held back by overcapacity caused by a steep drop in activity in the maintenance, modifications and operations market in Norway, as well as a major subsea project that had not yet started to recognize profit. This was somewhat offset by stronger project execution at umbilicals plants in the U.S. and Norway and improved capacity utilization in the engineering business.

The order intake was NOK 3.6 billion in the quarter, bringing the backlog to NOK 49 billion kroner.

“We made good progress in the quarter on major subsea and engineering projects and had a near-record backlog after significant contract wins earlier this year in Angola and Brazil,” said Luis Araujo, chief executive officer of Aker Solutions. “This puts us in a strong position to tackle a slowdown in some market segments as oil companies delay projects amid concerns over capital.”

After a split in September, Aker Solutions now has two reporting segments: Subsea, consisting of the subsea and umbilicals businesses, and Field Design, comprising the engineering and maintenance, modifications and operations (MMO) units. Subsea’s EBIT margin narrowed to 7.9 percent in the quarter from 8.5 percent a year earlier, while Field Design’s margin declined to 4.5 percent from 6.3 percent.

“We’re now a leaner and more focused company with strong positions in the deepwater and subsea markets,” Araujo said. “A top priority is to create value for our shareholders and customers through a ceaseless focus on operational excellence, cost control and financial performance.”

Aker Solutions sees a risk of delays as oil companies scale back some investments. The company anticipates this focus on capital discipline to continue over the next one to two years.

Activity is expected to be lower next year in the North Sea, Aker Solutions’ largest regional market, before picking up in 2016. Business should prove more resilient in markets such as sub-Saharan Africa and those exposed to national oil company investment trends, such as Brazil, Asia, and the Middle East. Aker Solutions’ growth over this period will likely be driven mainly by Brazil and Africa, where the company is well-positioned in the deepwater and subsea segments.

Press Release