Subsea 7 1H Profit Jumps to $400 Million
- Business & Finance
Subsea 7 S.A. has announced results for the second quarter and first half 2014 which ended on 30 June 2014. Revenue for the quarter was $1.9 billion, an increase of $224 million compared with Q2 2013.Revenue for the half year ended 30 June 2014 was $3.6 billion (1H 2013: $3.1 billion). Net income for Q2 was $265 million, compared to a net loss of $13 million in Q2 2013. 1H net income was $401 million, an increase of $283 million compared to 1H 2013.
The increase in 1H 2014 revenues was primarily reflected higher activity levels in the AFGOM. APME and Brazil Territories partially offset by a modest decrease in the NSC Territory.
Adjusted EBITDA was $716 million, an increase of $336 million or 88% compared to 1H 2013. Adjusted EBITDA margin was 20.0% compared to 12.1% in 1H 2013.
Net operating income was $516 million (1H 2013: $195 million). The increase was mainly due to the improved results related to the Guara-Lula NE project offset by a lower contribution from the Seaway Heavy Lifting joint venture due to the planned dry-docking of the Stanislav Yudin.
Administrative expenses were $148 million in 1H 2014 compared with $141 million in 1H 2013 which benefited from the reversal of a $16 million provision recognised at the date of the business combination in 2011.
Net income was $401 million, an increase of $283 million compared to 1H 2013. The increase in net income was primarily due to the increase in net operating income; finance costs of $ 12 million in 1H 2014 compared to $41 million in 1H 2013 which included finance costs associated with the 2013 convertible notes which were redeemed or converted in October 2013 partially offset by a $75 million increase in taxation charge compared to 1H 2013 driven by higher income before taxes.
The effective tax rate for 1H 2014 was 25.0%, compared to an effective tax rate of 33.4% for 1H 2013. The 2013 tax charge was adversely impacted by the Guará-Lula NE project loss.
Diluted earnings per share was S1.15 compared to $0.34 in 1H 2013, based on a share count of 375 million and 350 million shares respectively.
Jean Cahuzac, Chief Executive Officer, commented on the second quarter 2014: “The second quarter was another strong quarter for the Group, both operationally and financially. I continue to be pleased overall with our project portfolio execution. Consistent with our previous guidance, the Group’s order backlog ended the second quarter at $11.2 billion. Significant escalations on existing contracts mitigated the impact of clients delaying award dates for some of their new projects. Global vessel utilisation was 91%, which reflects good operational efficiency and a low level of dry-docking and planned maintenance in the period.
“Strong operational performance and good progress on the Guará-Lula NE project was evidenced by the installation of all four submerged buoys being completed in the second quarter. Installation of the risers is on-going and is progressing in line with our expectations. The new-build, the Seven Waves, commenced operations under contract in Brazil in the middle of the quarter, approximately three months ahead of schedule.
“Cash generation was strong in the second quarter, which ended with a cash and cash equivalents balance of $845 million, an increase of $307 million from the end of the first quarter of 2014, reflecting our continued emphasis on optimising working capital.
“The Group has now completed the $200 million share repurchase programme announced in October 2013. In the light of continued strong performance, the strength of the balance sheet and confidence in our business, the Board of Directors has authorised a further share repurchase programme of up to $200 million. This decision reaffirms our policy of returning excess cash to shareholders both in the form of share repurchases and dividends.”
Subsea 7 previously provided for the full year 2014 remains unchanged. Subsea 7 Group expects revenue to increase and Adjusted EBITDA to increase moderately from the level achieved in 2013 after adding back the $355 million full-life project loss provision recognised on the Guará-Lula NE project that year.
July 31, 2014