Aker Solutions 2Q revenues drop 22% to $653.2 million amid the global market slowdown
Aker Solutions secured NOK 3 billion in orders, including a contract to deliver three umbilicals and equipment to ENI's Coral South project and an order from Statoil for subsea equipment for Snefrid Nord in the Norwegian Sea. It won 41 study awards for front-end engineering, bringing the total in the first six months of the year to 71 studies for projects in Norway, the UK, the U.S., Brazil, Australia and Malaysia. That compares with a record of more than 80 studies for all of 2016, the Company's financial report for the period shows.
The company has completed more than 80 percent of a program aimed at increasing cost effiency across the business by at least 30 percent by the end of 2017. It is also benefiting from its more streamlined organizational structure of five delivery centers, introduced in November last year.
The company made good progress in integrating acquisitions, including the purchase in December of Brazilian maintenance and modifications provider, C.S.E. Mecânica e Instrumentação Ltda. Aker Solutions in April also bought the Norwegian oil and gas business of Reinertsen, Norway's third-largest offshore maintenance and modifications supplier.
The order backlog was NOK 30.7 billion at the end of the quarter, of which about half was for projects outside Norway. Finances were solid, with a liquidity buffer of NOK 4.9 billion at the end of the period.
Revenue fell to NOK 5.4 billion ($653.2 million) in the quarter from NOK 7 billion a year earlier amid the global market slowdown and as some projects neared completion. Earnings before interest, taxes, depreciation and amortization (EBITDA) were NOK 305 million in the quarter, compared with NOK 563 million a year earlier. The EBITDA margin was 5.6 percent versus 8.1 percent a year earlier. The company booked NOK 64 million in integration and restructuring costs related to the acquisition of Reinertsen. Excluding these and other special items, the margin was 7.4 percent compared with 8.5 percent a year earlier.
Aker Solutions has two reporting segments: Projects and Services. Revenue in Projects declined to NOK 4.2 billion in the quarter from NOK 5.5 billion a year earlier amid generally lower market activity and on some projects nearing completion. The EBITDA margin contracted to 5 percent in the quarter from 7.5 percent a year earlier. Revenue in Services fell to NOK 1.2 billion in the quarter from NOK 1.4 billion a year earlier, primarily driven by decreased activity for subsea services and a maturing production asset services portfolio. The EBITDA margin expanded to 12.5 percent in the quarter from 12 percent a year earlier, helped by a favorable activity mix and strong operational performance.
The company continues to see overall revenue down by about 10-15 percent in 2017 from the prior year, with an anticipated modest pickup in the field design segments of both Projects and Services while subsea volumes will be weaker. The company maintains its outlook for full-year underlying EBITDA margins to narrow slightly from first-quarter levels due to a continued market slowdown and a changing revenue mix. This will be partially offset by a continued strong momentum from the company's global improvement program.
Aker Solutions is a global provider of products, systems and services to the oil and gas industry. Its engineering, design and technology bring discoveries into production and maximize recovery. The company employs approximately 14,000 people in about 20 countries.