Kvaerner Reports Rise in Net Income. Targets Johan Sverdrup

Kvaerner,  a Norway-based engineering and construction services company, reported 2Q 2013 net income of NOK 75 million ($12.7 mln), compared to NOK 42 million ($7 mln) in 2Q 2013.

“The activity has been very high this quarter and both jackets for the Clair Ridge project were delivered. We focus on project execution and further development of our delivery models. At Stord, the new crane with a lifting capacity of 800 tonnes, is being installed. The crane is important for the yard’s capacity to assemble large platform modules,” says Jan Arve Haugan, President & CEO of Kvaerner.

Operating revenues in the second quarter 2013 amounted to NOK 3 616 million, compared with NOK 3 000 million for second quarter 2012. The revenue level is reflecting high activity on all on-going projects and the activity level is expected to remain high throughout the year.

Earnings before Interest, Taxes, Depreciation and Amortisation (EBITDA) for the quarter were NOK 163 million, compared with NOK 85 million in the same period last year. The EBITDA margin for the second quarter 2013 was 4.5 percent, up from 2.8 percent in the corresponding period in 2012.

Order intake in second quarter 2013 totalled NOK 2 305 million, including the scope of work of jointly controlled entities. This compares to NOK 15 427 million in second quarter 2012. As of 30 June 2013 the order backlog,  including the scope of work of jointly controlled entities, amounted to NOK 29 637 million.

 “The solid backlog with on-going projects gives us an opportunity to improve cost control and strengthen our competitiveness. We focus on executing our projects in a safe manner while positioning ourselves for new tenders”, says Haugan.

In line with the dividend policy, the Board of Directors has proposed to pay a cash dividend of NOK 0.58 per share in October 2013.

Outlook
The market continues to be promising for Kvaerner’s industry segments in macro terms. Kvaerner has seen a few project schedules sliding in some of its target regions. However, we do not see an industry trend of postponements, but caution in regions or projects where the commerciality is challenged. Efforts and priorities are continuously adjusted to reflect market developments. The Norwegian Continental Shelf continues to be
very important for Kvaerner and Johan Sverdrup is a key target. Globally, 2013 provides another year of FEEDs that opens up for new rounds of contract awards expected to be tendered for in 2014. In addition, there are opportunities for hook-up and inshore/offshore completion projects. The general interest in the Arctic regions is strong and Kvaerner experiences high activity on studies for Arctic areas.
For 2013 Kvaerner expects potential revenues in excess of NOK 16 billion including revenue from jointly controlled entities with an estimated NOK 2.5 billion for the year. Secured revenues for the remainder of 2013 is more than NOK 8 billion including contribution from jointly controlled entities.

Kvaerner also has secured revenues of more than NOK 12 billion for 2014 and more than NOK 8 billion for 2015 and onwards reflecting a high order backlog. In the Upstream segment, negative developments in the early cycle projects and lack of new contracts within Jackets and Contractors International are offsetting expected margin improvement impact from more recent awards. In addition, growth in procurement volumes in the project portfolio also contributes negatively to the margins and it is therefore unlikely that the 2013 EBITDA margin will be within the normalised range of 5-10 percent. The annual EBITDA for the Downstream & Industrials segment is expected to be in the range of negative NOK 20-30 million due to scope of work reductions and higher legal costs.

Future results within Downstream & Industrials are expected to be limited until the Longview arbitration has been resolved, reflecting that there is still a high degree of uncertainty with regards to legacy projects. Kvaerner’s main focus continues to be project execution of the current portfolio and to improve the company’s competitiveness and delivery models.