Aker Sees Focus on Profitability Begin to Pay Off

Norwegian oilfield services supplier Aker Solutions reported Wednesday that its increased focus on profitability rather than chasing turnover is beginning to pay off after a challenging start to 2013.

Aker said that all its areas of business are now committed to improvement programs that is expected to lead to double-digit profit margins. The company said that new investment criteria are being set, which will mean each investment will need to meet a "challenging business rationale".

Aker Executive Chairman Øyvind Eriksen said in a company statement:

"While we will continue to build Aker Solutions, the focus on topline growth will be toned down and more attention will be paid to growing our profit and share price. We are going to reduce our investment levels so that we don't overinvest in capacity that could erode margins."

Aker's profit margin at the EBITDA level widened to 9.8 percent during the third quarter from 7.9 percent during the first half of the year, helped by its improvement programs.

Meanwhile, the firm said that it continues to experience "robust demand" for its products and services in most markets, even as some oil producers delay projects amid cash flow concerns.

"We are optimistic about our market segments. So far this year, the order intake has grown by 20 percent and the order backlog by 33 percent, which is a decent development," Eriksen said.

The firm believes it is well positioned to capture growth in key markets such as subsea and in regions that include Brazil and Norway. After several recent divestments, Aker said it is now more streamlined to play to its strengths in the deepwater and subsea sectors.

"Aker Solutions will prioritize high-growth areas with significant barriers to entry and businesses that yield a high return on capital," Eriksen added.

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