Kvaerner Reports Robust 3Q Results in Challenging Market
Kvaerner increased the adjusted EBITDA margin to 12.6 percent for the third quarter, up from 5.2 percent in the same period last year and 5.7 percent in the previous quarter.
"The margin reflects our improvements and ability to deliver predictably, which affected the results positively through reaching planned milestones on several projects," says Kvaerner's President & CEO Jan Arve Haugan.
Kvaerner's efforts to improve costs, quality, productivity and competitiveness are currently yielding results on the current portfolio of projects. During the third quarter, two jackets and the topside for Johan Sverdrup passed 20 percent completion, and accumulated profit for these projects has been recognised. Additionally, the results were positively impacted by final account and performance bonus of NOK 50 million for a recently completed project.
In the third quarter, total revenues, including jointly controlled entities, amounted to NOK 2 727 million compared to NOK 3 615 million in the same quarter 2015. Adjusted EBITDA ended at NOK 265 million, compared to NOK 166 million in the third quarter last year. Net operating cash inflow was NOK 407 million in the quarter. This reflects positive results, including insurance recovery of USD 19 million related to the Longview Power project.
"Our market position and financial platform give resilience to manage the current volatile market cycle. Simultaneously, this strength allows us to consider structural measures to grow and create an even more robust Kvaerner," says Jan Arve Haugan.
As of 30 September 2016, Kvaerner's order backlog was NOK 8 397 million, down from NOK 10 172 million at the end of the second quarter. Order intake was NOK 1 049 million in the third quarter, including the NOK 350 million pre-EPC call off for preparations and docking of the Njord A platform at Kvaerner's Stord facilities.
The oil and gas market remains challenging, but Kvaerner is well prepared for a market with continued volatility. The company will continue to reduce costs and strengthen its competitive power. Kvaerner expects some few projects in relevant segments to come up for contract award in 2016, 2017 and 2018. There are several signals of upcoming prospects, including FPSOs as well as unmanned wellhead platforms with tie-backs to existing infrastructure. The improvements over the last few years mean that Kvaerner can deliver such projects at a cost which is attractive even with oil prices at levels around USD 50 per barrel.
"Oil companies with plans for new projects seem to put more emphasis on selecting contractors based on safe and predictable delivery connected to schedule, quality and total price. The timing of new projects remains uncertain. We are pursuing prospects to secure an effective capacity utilisation during 2017," says Jan Arve Haugan.