Aker Solutions Slow Out of the Blocks
"The slow start to 2013 is truly disappointing," says Øyvind Eriksen, Executive Chairman of Aker Solutions ASA.
Aker Solutions decided to disclose preliminary information on its financial performance in the first three months of 2013 as the results so far considerably lag current consensus market estimates.
Aker Solutions expects to report revenue of NOK 11.1 billion and earnings before interest, tax, depreciation and amortisation (EBITDA) of NOK 868 million for the first quarter of 2013.
The earnings were impacted by increased costs at the Ekofisk Zulu platform project as work was accelerated to ensure the platform will be transported from the Egersund yard to the Ekofisk field in mid-June and start producing oil by October 2013. Extra work caused by quality issues related to cables delivered by a sub-supplier also increased the project's costs. Aker Solutions' Maintenance, Modifications and Operations (MMO) business area manages 60 percent of the project, while the company's Engineering business area manages 40 percent. The final project result will depend on bonus payments triggered by timely delivery, start-up of the platform and the final settlement with the customer.
Results were also weighed down by a loss of NOK 63 million at the Umbilicals business area. Aker Solutions in the first quarter wrote down the value of several Umbilicals projects following a thorough review of the entire portfolio. Several of the projects have, as previously reported, suffered from operational challenges in Norway. As a turnaround plan is about to be implemented, the Umbilicals business area is expected to generate a low, but positive EBITDA margin in the second quarter.
The earnings were also impacted by a loss of NOK 54 million at the Oilfield Services and Marine Assets (OMA) business area as the vessels Aker Wayfarer and Skandi Aker were idle in the first quarter. The OMA business area is expected to incur additional losses in the second quarter as Aker Wayfarer and Skandi Aker are set to remain idle until commencing operations in mid-June and mid-July, respectively. The Cat B project is, as previously communicated, in a system definition phase where Aker Solutions and the client are in a dialogue on how to proceed. The parties will spend the time required to find a solution and no news should be expected in the near future.
In addition, EBITDA margins for the business areas Drilling Technologies, Well Intervention Services and Mooring and Loading Systems were slightly lower in the first quarter than the average in recent quarters, mainly because of increased costs at some projects, some delayed contract awards and timing of progress.
Aker Solutions will present a full set of first-quarter earnings on May 8, 2013. The figures reported today are preliminary and have not been discussed or approved by the Aker Solutions Board of Directors.
"The slow start to 2013 is truly disappointing," says Øyvind Eriksen, Executive Chairman of Aker Solutions ASA. "As lost or postponed contract awards are part of the game, some of the quality issues are, simply speaking, unacceptable. We have worked hard to avoid such mistakes, but there is still a way to go. My hope is that the customers appreciate our efforts to deliver according to our commitments to safeguard their commercial interests and that we ultimately will be able to find amicable solutions to some of the additional costs."