Input costs on certain of SBM Offshore's major projects have now exceeded the provisions and contingencies previously budgeted due to growth and acceleration of the work scope required to deliver the facilities.
These extra costs will weigh heavily on the mid-year turnkey systems results which are expected to be well below the comparative period for 2007. The shortfall will be partially compensated by the lease and operational activities, which have performed ahead of the previous year and ahead of the 2008 budget. Mid-year results will be announced on August 19, 2008.
At this stage, given the input cost increases reported above, the Company's 2008 full-year profit expectation falls by up to 20% of the original target of US$ 280 million. This reduction does not however take into account potential recoveries from claims and variation orders on major projects which are currently under negotiation with clients. These discussions are not sufficiently advanced to warrant inclusion of additional revenues in the mid-year figures, but are expected to be largely concluded during the second half of the year.