Aker Solutions has seen its profit decline in the second quarter on MMO overcapacity, lease costs and lower demand for subsea services in the North Sea.
The company generated revenue of NOK 8 billion in the second quarter of 2015 compared with NOK 8.1 billion a year earlier, due to projects in Africa, Norway and Brazil. However, revenue for the first half of 2015 rose to NOK 16.5 billion from NOK 15.5 billion a year earlier.
Subsea revenue increased in the second quarter to NOK 4.8 billion from NOK 4.7 billion a year earlier, driven by progress on major projects in Angola, Congo and Brazil. The EBIT margin narrowed to 7.1 percent from 9.1 percent a year earlier amid high tender costs and declining demand for subsea services in Norway.
Aker Solutions’ pretax profit for the second quarter fell to NOK 310 million from NOK 526 million a year earlier. Net income in the quarter fell to NOK 209 million (approx. USD 25.7 million) from NOK 388 million (approx. USD 47.7 million) in the year-earlier period. Earnings per share (EPS) fell to NOK 0.73 in the quarter from NOK 1.41 a year earlier.
Pretax profit for the first half of 2015 declined to NOK 648 million from NOK 917 million. Net income for the first six months fell to NOK 428 million from NOK 671 million. EPS were NOK 1.52, compared with NOK 2.44 a year earlier.
As mentioned above, earnings were impacted by overcapacity costs in the maintenance, modifications and operations (MMO) workforce as well as a NOK 58 million provision to cover lease costs for vacated office space. In addition, the company has noted a drop in subsea activity in the North Sea.
Aker Solutions in June announced that it would adjust capacity at its subsea services facility in Ågotnes, Norway, by as many as 200 positions to counter a market slowdown. The company has since 2014 also reduced its Norwegian MMO workforce and will remain vigilant about capacity in all parts of the business to fit market conditions.
Furthermore, the company reported cashflow from operations at negative NOK 80 million in the second quarter compared with a positive NOK 1.8 billion a year earlier when there was a substantial customer payment on a project. Cashflow from operations in the first half of the year was a negative NOK 494 million compared with a positive NOK 939 million a year earlier.
Order intake in the second quarter was NOK 3.4 billion and included a new MMO contract from ExxonMobil for engineering, procurement, construction and maintenance services at the Hebron oilfield offshore Canada. That compares with NOK 21.4 billion a year earlier when the company won a NOK 14 billion subsea contract for the Kaombo development in Angola. The order backlog fell to NOK 44 billion at the quarter’s end from NOK 53.9 billion a year earlier. Aker Solutions in the quarter announced its first order for an offshore project in Mexico, securing a contract from Saipem for umbilicals at the Pemex-operated Lakach deepwater natural gas field. The order was booked in the first quarter of 2015.
The subsea order backlog fell to NOK 27.5 billion at the end of the quarter from NOK 38.5 billion a year earlier. The backlog was slightly higher than total subsea revenue in the preceding 15 months.