Aker Solutions Results Hurt by Cancelled Orders, Low Capacity Utilisation

 Aker Solutions Results Hurt by Cancelled Orders, Low Capacity Utilisation

Norwegian oilfield services provider Aker Solutions generated revenue of NOK 11,907  million in the second quarter, little changed from the same quarter a year earlier. First-half year sales were NOK 22,967 million, compared with NOK 21,730 million a year earlier. 

Earnings before interest, tax, depreciation and amortisation (EBITDA) were NOK 946 million in the second quarter,  compared with NOK 1,357 million a year earlier when a net gain of NOK 165 million on real estate was included. The secondquarter EBITDA margin was 7.9 percent, compared with 11.4  percent a year earlier. The EBITDA was NOK 1,814 million in  the first half of 2013, compared with NOK 2,397 million in the
year-earlier period. The EBITDA margin was 7.9 percent in the first half of 2013, compared with 11 percent a year earlier.

Second-quarter earnings were hurt by low capacity utilisation in the engineering business as new orders waned. The results were also impacted by two idle vessels, the Aker Wayfarer and the Skandi Aker, as well as a minor loss in the umbilicals business. The cancellation in June of a contract for a Category B rig led to a one-time cost of NOK 375 million.

Of this, NOK 361 million was recognised as an investment impairment, while the rest was booked in operating costs.The Subsea business area generated revenue of NOK 3,535
million in the quarter. Continued efforts to improve project execution yielded results. The Subsea EBITDA margin was 10.2 percent in the quarter, up from 7.9 percent a year earlier. Fluctuations in the fair value of hedging transactions that did not qualify for hedge accounting led to an accounting gain of NOK 102 million in the quarter, of which a loss of NOK 27 million was booked under EBITDA and a gain of NOK 129
million was booked under financial items. For the first half of the year the accounting gain was NOK 104 million, of which a loss of NOK 24 million was booked under EBITDA and a gain of NOK 128 million was booked under financial items.

Pre-tax profit for the second quarter was NOK 172 million, down from NOK 846 million a year earlier. Taxes were NOK 48 million, corresponding to an effective tax rate of 28 percent. Net profit for the second quarter was NOK 124 million, compared to NOK 678 million in the second quarter last year. Earnings per share were NOK 0.44, compared with NOK 2.50 in the same period last year.

 “Aker Solutions in the second quarter resolved execution problems that led to weak results at the start of the year,” said Executive Chairman Øyvind Eriksen“We delivered on key projects, including the Ekofisk Zulu platform and seven umbilical systems, and reduced the risks in our portfolio.”

The Ekofisk Zulu platform was handed over as planned to ConocoPhillips this summer and Aker Solutions also delivered the steel frame for the world’s first subsea gas compression facility at the Statoil-operated Åsgard field. The Aker Wayfarer started operations in June and Skandi Aker sailed to Angola where it is expected to start work next month. Operations were improved at Aker Solutions’ umbilicals plant in Norway, ensuring delivery of seven umbilical systems.

Performance in the three largest business areas – subsea, drilling technologies and maintenance, modifications and operations – was stable in the second quarter. Subsea, the largest area, increased its EBITDA to NOK 361 million from NOK 268 million a year earlier. It won NOK 3.8 billion in orders, including a USD 440 million contract on a subsea production system for a UK North Sea oilfield development, leading to a record order intake in the first half of the year.

Outlook
Aker Solutions experiences robust demand for its products and services in most markets and is well-positioned in the fast-growing deepwater segment. Tendering activity is high. At the same time, oil companies have delayed some projects amid cashflow concerns, increasing uncertainty about future investments and the timing of contract awards to oil-services providers.

Capacity utilisation at the company’s new engineering hubs in the UK and US was low in the second quarter after the loss of several large contract bids in late 2012 and early 2013. Aker Solutions laid off some non-permanent staff, mainly in London and Houston, but not in Norway where the activity level remains robust.

We see several big opportunities ahead for engineering,” Eriksen said. “The current high level of activity in conceptual work indicates a new wave of engineering projects in the years to come.”

[mappress]
 August 27, 2013