Aker Solutions Takes Profit Hit
Aker Solutions’ net income for the quarter fell to NOK 220 million ($28.7 million) from NOK 283 million ($37 million) in the same period last year. Earnings per share (EPS) fell to NOK 0.79 in the quarter from NOK 1.03 a year earlier.
Earnings were impacted by costs of overcapacity in the maintenance, modifications and operations (MMO) workforce, a NOK 52 million provision to cover lease costs for vacated office space and a NOK 26 million write-off on some subsea technology.
The results were also affected by a slow start to the year for subsea services, particularly in the North Sea, and some unfavorable outcomes of late-stage commercial discussions on a few subsea projects.
“The markets continued to be challenging as many of our major clients remain vigilant in how they allocate their capital,” said Luis Araujo, Aker Solutions’ chief executive officer. “Still, our healthy order backlog puts us in a strong position as we face this uncertain outlook. We made good progress in the quarter on major projects and also benefited from improvement programs across the business.”
The company’s revenue, however, rose 14 percent to NOK 8.5 billion in the first quarter of 2015 from NOK 7.5 billion in the year-earlier period, helped by progress on major projects from Angola to Brazil and Norway.
Aker Solutions’ subsea revenue rose 24 percent in the quarter to NOK 5.1 billion from a year earlier, driven mainly by progress on major projects in Angola, Congo and Brazil. The EBIT margin narrowed to 7 percent in the quarter from 7.2 percent a year earlier.
Sales in Field Design, comprising the engineering and MMO units, rose 2 percent from a year earlier to NOK 3.5 billion in the quarter. The EBIT margin in the same period narrowed to 4.4 percent from 6.8 percent as improved engineering margins were offset by weaker MMO results.
Aker Solutions secured NOK 9 billion in orders in the quarter, including a NOK 4.5 billion five-year contract from Statoil to provide engineering, procurement and management assistance (EPMA) services at the Johan Sverdrup oilfield in the North Sea.
The company also won an order from Statoil for concept studies on future phases of the development. This helped boost the order backlog to NOK 48.3 billion at the end of the quarter from NOK 39.6 billion a year earlier. About two-thirds of the backlog came from projects to be delivered outside Norway.
Subsea’s order intake fell 55 percent to NOK 2 billion in the quarter from a year earlier and consisted of smaller new projects and growth in existing contracts. While tendering activity was high, major projects were postponed. The order backlog rose 27 percent from a year earlier to NOK 30.4 billion at the end of the quarter. The backlog exceeded total subsea revenue in the prior 18 months.
“Underlying factors supporting a positive long-term outlook for offshore and deepwater oil and gas developments remain in place. Short-term uncertainty has increased as oil companies scale back spending amid concern over capital and the drop in oil prices since July last year. The Norwegian MMO market has been especially affected by the slowdown, which the company expects to last one or two more years. Major projects such as the Johan Sverdrup development are seen offsetting some of the decline,” said the company in a statement.