Subsea Business Drives Growth at Aker Solutions

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Aker Solutions sees more sales and robust order book thanks to a strong performance in its subsea business, but its maintenance unit is affected by reduced spending by oil firms in Norway.

Norwegian oilfield services firm Aker Solutions reported Thursday that the three months to December 31 represented its best quarter of 2013 thanks to its subsea operation delivering a record profit margin and a substantially-increased subsea order backlog.

Aker's sales during 4Q 2013 were $1.82 billion (NOK 11.4 billion), compared with $1.79 billion (NOK 11.2 billion) in 4Q 2012, while its fourth quarter profit on an EBITDA level held steady at $170 million (4Q 2012: $174 million). The EBITDA figure represented the culmination of a year of steady progress in earnings after a poor first quarter in which Aker produced an EBITDA of just $122 million (NOK 767 million).

"We achieved an improvement in earnings throughout last year, but that doesn't tell the full story," Aker Executive Chairman Øyvind Eriksen said in a company statement.

"Our subsea business became a market winner in the fastest-growing offshore segment and our engineering unit managed to turn a slow start to the year into an opportunity to cement its position over the next decade."

Subsea, Aker's largest business area, delivered a record profit margin of 11.4 percent during the fourth quarter. Meanwhile, the subsea business also more than doubled its order backlog to $3.5 billion (NOK 21.6 billion).

The firm's engineering business also achieved its strongest margin of 2013 during the fourth quarter (8.4 percent) as capacity costs were reduced at its new hubs in London and Houston.

But earnings in its maintenance, modifications and operations business were adversely affected by increased costs at some projects and lower activity levels in Norway due to oil companies reducing their spending. As a consequence, the profit margin here was only 6.8 percent during the quarter.

There is some concern among suppliers to the upstream oil and gas sector in Europe about oil majors focusing on dividend payouts to their investors and reduced spending as a consequence, with Statoil ASA, Royal Dutch Shell plc, BP plc and others reporting plans to limit capex in recent months.

However, Aker said that demand has remained healthy for most of its products and services and the high order backlog gives it confidence in a robust medium-term outlook. Meanwhile, "key wins" in Brazil and Norway, including its recent $105-million front-end engineering and design contract for the giant Johan Sverdrup development in the North Sea, bolsters the longer term outlook for the company, it said.


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