Technip Maintains Momentum in Backlog, Revises Full Year Objectives
Technip’s Board of Directors approved the third quarter 2013 consolidated accounts on October 29, 2013,
Thierry Pilenko, Chairman and CEO, commented in detail on the quarter and the outlook:
‘In the third quarter, Technip’s performance was contrasted between our two activities. On the one hand, Onshore/Offshore was a good performer: segment revenues were up 30% with margins of 6.6% in the middle of our target range. On the other hand, Subsea revenues were up only 2% (after c. €100 million of currency translation effects) although margins were at 14.7%, overall slightly ahead of our expectations at the end of the second quarter. Subsea profitability was affected by around €20 million of currency effects, €10 million of one-off costs (vessel depreciation) and a push-out of projects in the Gulf of Mexico. In particular, the Deep Energy vessel is in the Gulf of Mexico completing what has been, however, a significantly longer final commissioning period than planned. Group cash flow was strong during the quarter with e.g. €165 million of positive wording capital, confirming the trend we forecasted at the end of the first semester. Overall, revenues and profit were held back across the Group by currency translation effects (year-on-year around €150 million and €30 million respectively).
Order intake was strong at over €3 billion and included major project wins in the Middle East and Brazil. We continued to execute our strategy during the quarter with key alliances formed for example with China Huanqiu Contracting & Engineering Corporation (HOC) in Onshore procurement and with Sasol in gas-to-liquid (GTL). Progress on our strategic new assets continued – including construction of manufacturing facilities, Acuflex in Brazil and Newcaflex in England.
For the rest of the year, the contrast in our activities is likely to continue. The fourth quarter in Subsea will see a busier schedule of installation operations in the US Gulf of Mexico than planned. As a result, there is an increased dependence in the region on managing schedule conflicts, on which we are actively working with our customers, as well as on the performance of the Deep Energy vessel on her first projects. Operations in other regions have been successful over the last quarter but the US Gulf of Mexico is important for segment profitability in the fourth quarter as there is a lower level of subsea installation activity in those other regions.
We have revised our full year guidance as follows: for the Onshore/Offshore segment, we expect full year revenues and margins towards the top of our target range, revenues of around €5.2 billion, and operating margins between 6.5% and 7%. In Subsea, however, we expect full year revenues of around €4.1 billion. The fourth quarter revenues and currency impacts will hold back profitability and full year Subsea margins, previously targeted around 15%, are likely to be around 14%. Our revised guidance for both segments also assumes that foreign exchange movements will affect revenue and margin in a similar way as in the third quarter.
Looking ahead to 2014, we have a strong, diversified book of business for execution across both segments to drive revenue growth. In Onshore/Offshore, we will look to start 2014 in line with our long-term target margins. In Subsea, we can confirm that there will be much less new asset start-up cost compared to 2013 and the positive contribution of subsea installation work on large, multi-year Subsea projects will materialize as the year progresses.
By the end of the year, we will have gained much greater clarity on the schedule of new large, multi-year Subsea awards expected this year (including TEN in Ghana announced this morning); the timing and extent of the first orders for our new flexible pipe plant at Acu (which will determine the speed and extent of its ramp-up in 2014), our plan to accelerate vessel maintenance and enhancements in first half 2014, and the final close-out early next year of the current Gulf of Mexico projects. Accordingly, we intend to communicate further on 2014 by the end of December.
The medium-term trends for both segments – Subsea and Onshore/Offshore – continue to be positive. Our broad, diversified client base continues to drive ahead with key projects. We see project award momentum over the coming months in for example downstream North America and Asia Pacific, large offshore projects in Africa, pre-salt flexible pipe awards in Brazil and frontier subsea areas like the West of Shetland in the North Sea. Accordingly, we will continue to drive our strategic development in line with the key pillars of our strategy. In the coming months we will remain most of all closely focused on our current projects so as to maintain our strong execution track record.”
Press Release, October 31, 2013