Compagnie Generale de Geophysique First Quarter 2004 Results

Compagnie Generale de Geophysique (ISIN: 0000120164 - NYSE: GGY) published its consolidated results for the first quarter of 2004.

Q1 2004 main events:

  • Revenues for the first quarter of 2004 are up 3% in Euros and up 20% in USD compared the first quarter of 2003
  • Historically high quarterly revenues in dollars at Sercel, ($103M, euro 83M)
  • Improvement of the Group operating result to $12.6M compared to euro 3.4M in Q1 2003 despite a negative euro/$ exchange rate effect estimated at euro 12M.
  • Sercel operating income of euro 21.3M representing a 26% operating margin. Q1 profit of euro 6.1M compared to a net loss of euro 5.5M in Q1 2003.
  • 40% year on year backlog's growth.


  • 
                          Consolidated Statement of Earnings
                                    (non audited)
        Million of Euros                                 Period ended March 31st
                                                               2004         2003
        Operating revenues                                    161.8        156.7
        Operating profit (loss)                                12.6          3.4
        Income (loss) from equity investments                   2.1          3.0
        Goodwill depreciation                                  (2.0)        (1.5)
        Net interest expenses                                  (6.3)        (8.4)
        Exchange gains (losses)                                 4.6          0.8
        Income taxes                                           (4.9)        (2.7)
        Minority interest                                                   (0.1)
        Net income (loss)                                       6.1         (5.5)
    
        Earnings per share (Euros)                             0.52        (0.47)


    Revenues:

    At Euros 162 million (USD 202 million), revenues for the first quarter of 2004 were up 3% in Euros and 20% in USD compared to Euros 157 million (USD 168 million) for the first quarter of 2003.

    Total revenues for Geophysical Services for the first quarter 2004 were Euros 83 million (USD 104 million), down 34% in Euros and 23% in USD compared to Euros 125 million (USD 134 million) for the first quarter of 2003.

    The Land activity saw its total sales for the first quarter 2004 decreased by 52% in Euros and 44% in dollars to Euros 25 million (USD 31 million) compared to Euros 51 million (USD 55 million) for the first quarter of 2003. On average, 9 crews were in operation across the period, compared to 14 last year. During this quarter, the land acquisition SBU operated in line with the economical targets of its restructuring plan.

    The Offshore revenues at Euros 35 million (USD 44 million) for the first quarter 2004, were down 25% in Euros and 12% in dollars compared to Euros 46 million (USD 50 million) for the first quarter of 2003, reflecting in particular a low level of prices in the exclusive offshore acquisition market. During the quarter, the vessels were operating at 60% on exclusive contracts compared to 20% last year. The net book value of the offshore seismic data library at the end of March 2004 was Euros 152 million, following Euros 16.8 million sales and Euros 18.0 million of investments in the quarter.

    For the first quarter 2004, Processing and Reservoir revenues were Euros 23 million (USD 29 million), down 15 % in Euros and stable in USD compared to Euros 28 million (USD 29 million) for the first quarter of 2003 in a market where CGG maintained its positions.

    For the first quarter 2004, Sercel total sales were Euros 83 million (USD 103 million), up 120 % in Euros and up 152% in USD, compared to Euros 38 million (USD 41 million) for the first quarter of 2003. External sales for the first quarter 2004 were Euros 79 million (USD 97 million). Within a growing geophysical equipment market, Sercel reached a historically high quarterly revenue level expressed in dollars resulting from strong land equipment deliveries corresponding to orders booked at the end of 2003 and from a renewed growth in the marine equipment market.

    Operating Result:

    The Group Operating Result for the first quarter 2004 was a Euros 12.6 million profit compared to a Euros 3.4 million profit for the first quarter of 2003. The increase in the operating margin results exclusively from the excellent operating performance of Sercel. Despite an unfavourable euro/$ exchange rate estimated at 4% of margin points, Sercel's operating profit for the first quarter of 2004 was Euros 21.3 million, a 26% operating margin, compared to an operating profit of Euros 5.2 million in Q1 2003. The Geophysical Services operating result was a loss of Euros 7.3 million compared to a profit of Euros 1.2 million for the same period last year. This decrease of operating performance is mainly due to the combined negative effect of the euro/$ exchange rate estimated at Euros 4 million and to low marine prices still suffering from the sector's overcapacity.

    
                                 Segment information
        Million of Euros                                 Period ended March 31st
                                                               2004         2003
        Operating revenues
        Services                                               83.9        125.7
        Products                                               82.8         37.7
        Elimination                                            (4.9)        (6.7)
        Total                                                 161.8        156.7
        Operating profit (loss)
        Services                                               (7.3)         1.2
        Products                                               21.3          5.2
        Corporate                                              (2.4)        (2.7)
        Elimination                                             1.0         (0.3)
        Total                                                  12.6          3.4
    


    Operating Result Before Depreciation and Amortization:

    The Operating Result Before Depreciation and Amortization, "ORBDA", previously denominated "Adjusted EBITDA" in our precedent financial reports is defined as operating income (loss) excluding non-recurring revenues (expenses) plus depreciation, amortization and additions (deductions) to valuation allowances of assets and add-back of dividends received from equity companies. The ORBDA for the first quarter 2004 is Euros 35.4 million, 22% of the revenues.

    
                                Summary of cash-flows
        Million of Euros                                 Period ended March 31st
                                                              2004          2003
        Cash flow from operations                             39.9          48.2
        Capital expenditures                                 (13.1)         (9.4)
        Investment in library                                (18.0)        (32.3)
    
        ORBDA                                                 35.4          46.7
    


    Net Result:

    Net result for the first quarter 2004 was a Euros 6.1 million profit, compared to a Euros 5.5 million loss for the first quarter 2003. Balance Sheet items:

    As of March 31st 2004, net equity stood at Euros 410 million and net debt at Euros 173 million representing a 42% gearing ratio. The increase of Euros 34 million in net debt compared to year-end 2003 results exclusively from the payments of the recent Sercel acquisitions and from the cash disbursements of the land acquisition restructuring program, while operating activities provided a positive net cash flow during the period.

    
                                 Equity and Net Debt
        Million of Euros                                 31/03/2004   31/12/2003
        Shareholders' equity                                  409.8        396.6
        Net debt                                              173.0        139.2
        Gearing ratio                                          42.2 %       35.1 %
    


    Backlog and 2004 perspectives:

    The backlog as of May 1st 2004 stood at USD 305 million up 40% compared to the same period last year. This strong backlog will favorably impact the second semester, in particular the Geophysical Services with the second quarter representing a low point. After an exceptional first quarter, Sercel will see a good level of activity across the year.
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