Technip Reports First Quarter 2004 Results

                    First Quarter
Euros in millions
(except EPS and E/ADS)                      2004     2003     Change
                                          -------- -------- ----------

--  Backlog at Period End                  6,451    6,091      + 5.9%
--  Revenues                               1,250    1,099     + 13.7%
--  Income from Operations (EBITA)          50.0     44.4     + 12.6%
--  Net Income                              (3.3)    (3.5)     + 5.7%
--  Net Income before Non-Operating
    Items and Goodwill Amortization         26.6     19.3     + 37.8%
--  Fully Diluted EPS (EUR)                 0.97     0.79     + 22.8%
--  Fully Diluted E/ADS ($)                 0.30     0.24     + 25.0%

The Board of Directors of Technip met yesterday and approved the unaudited first quarter 2004 consolidated accounts.

Daniel Valot, Chairman and CEO, commented: "As expected, Technip's first quarter earnings are up. Strong growth is expected to continue in the second and third quarters, which should allow Technip to attain its full-year target of 35% growth in pre-goodwill net income.

"While net consolidated debt position continued to improve during the first quarter and led to a further reduction in the Group's gearing ratio, Technip has also re-engineered its financial structure. A new, single five-year revolving credit facility of EUR 850 million has replaced two previously existing credit lines. A seven-year EUR 650 million Eurobond has also been successfully placed, allowing the Group to extend its debt maturity while taking advantage of the historically low level of long-term interest rates.

"Offshore contract awards were up compared to the same period one year ago. Onshore/Downstream order intake was below the extraordinarily high first quarter 2003 level. For the remainder of the year, prospects for new contract awards remain promising, particularly for offshore developments, major gas projects as well as petrochemical facilities. In particular, a number of extra-large gas-related projects such as treatment plants, liquefaction units and gas-to-liquids facilities are expected to be awarded to the industry during the next twelve months in the Middle East, Africa and Asia Pacific."


During the first quarter of 2004, Technip's order intake was EUR 876 million (versus a preliminary estimate of EUR 840 million) of which 69.1% related to the Offshore Branch. Listed below are the main contracts which came into force during the quarter along with their approximate values (Technip's share):

  • a contract awarded by BP for the development of the Greater Plutonio field, located offshore Angola in Bloc 18, between 1,200 and 1,500 m water depth (EUR 143 million);
  • a contract awarded by Kerr-McGee Corp. for the engineering and construction of a Spar floating production platform hull and the engineering and delivery of the associated moorings and production riser system for the Constitution field in the Gulf of Mexico;
  • a contract awarded by Woodside Energy Ltd. for the Enfield oil development located offshore Western Australia in the Carnarvon Basin (EUR 50 million); and
  • two contracts awarded by Shell and Eni for key sub sea developments (Pierce and Stirling, respectively) in the UK North Sea (EUR 26 million).

  • As of March 31, 2004, the backlog(1) amounted to EUR 6,451 million versus EUR 6,091 million registered at March 31, 2003 (+ 5.9%). Compared to year-end 2003, the backlog as of March 31, 2004 was down by EUR 729 million. Almost half of this reduction came from both foreign exchange translation adjustments (approximately EUR 189 million) and changes in the scope of consolidation (approximately EUR 160 million).(2)

    The Offshore backlog of EUR 2,775 million increased by over 72.5% compared to its level one year ago and accounted for 43.0% of the Group's overall backlog. The Onshore/Downstream and Industries combined backlog was EUR 3,676 million, compared to EUR 4,482 million at the end of March 31, 2003. Order intake during the first quarter of 2003 included a large gas-to-liquids (GTL) contract worth USD 675 million.


    A) Income Statement

    Revenues were EUR 1,250 million, up 13.7% compared to the first quarter of 2003 (EUR 1,099 million). Offshore revenues were up 17.7% year-on-year as activity picked up due to the execution of contracts awarded in 2003. Subsea umbilicals, risers and flowlines (SURF) revenues were up 25.9% at EUR 355 million, while Facilities revenues amounted to EUR 262 million, an increase of 8.3% compared to the first quarter of 2003. Onshore/Downstream revenues rose 19.8% due to large contracts signed in 2002 and early 2003 coming into full-scale implementation. Industries revenues amounted to EUR 58 million due to the previously mentioned change in the scope of consolidation.

    Income from operations(a) (EBITA) amounted to EUR 50.0 million, a 12.6% increase versus EUR 44.4 million reported for the same period one year ago. The Group EBITA margin for the first quarter 2004 was 4.0%, unchanged year-on-year. SURF margins demonstrated significant improvement compared to the first quarter of 2003, increasing from 4.7% to 8.1% due to higher sales volume and the completion of a couple of challenging contracts which had generated losses during 2003. Facilities margins declined due to the Group's decision to apply its progressive margin recognition policy to this segment as of January 1, 2004. Onshore/Downstream returns improved to 4.0% (up from 3.7% one year ago) in line with the more advanced maturity profile of the activity's contracts under execution. The Industries' margin is slightly better than breakeven following the repositioning of this activity which began in the second half of last year.

    Financial charges decreased to EUR 7.9 million during first quarter 2004, compared to EUR 10.5 million registered for the same period in 2003. The improvement was primarily related to the sharp reduction of the provision for the redemption premium on convertible bonds following the repurchase of convertible bonds and subsequent cancellation during the first quarter of 2004.

    Profit before tax(a) for the first quarter 2004 was EUR 39.7 million, compared to EUR 37.3 million for the same period in 2003. Excluding non-operating items, profit before tax progressed 19.5% year-on-year. Income taxes were EUR 13.8 million, reflecting an average corporate tax rate of 32.3%.

    After tax, net income pre-goodwill was EUR 25.9 million, up 13.6% compared to EUR 22.8 million during the first quarter 2003. After goodwill amortization of EUR 29.2 million, net income was EUR (3.3) million compared to EUR (3.5) million for the first quarter of 2003.

    Excluding non-operating items and goodwill amortization, the consolidated net income of the Group increased by 37.8% to EUR 26.6 million.

    For the first quarter of 2004, fully diluted EPS increased 22.8% to EUR 0.97 while fully diluted E/ADS was up 25.0% at USD 0.30.

    First quarter 2004 net income reconciled to U.S. generally applied accounting principles (U.S. GAAP) more than doubled to EUR 29.6 million (unaudited). The main adjustment to reported French GAAP net income is the restatement of goodwill amortization of EUR 29.2 million.

    B) Cash Flow Statement

    Net cash provided by operating activities increased by EUR 95.4 million thanks to increased cash from operations and a significant improvement in working capital. Capital expenditures came down to EUR 13.9 million versus EUR 18.2 million in the first quarter of 2003. As a result, the Group was able to reduce its debt by EUR 113.6 million during the first three months of 2004.

    C) Balance Sheet

    The Group's net debt (excluding the redemption premium on convertible bonds) as of March 31, 2004 was EUR 171 million compared to EUR 506 million as March 31, 2003 and EUR 237 million as of December 31, 2003.

    As a result, net gearing at the end of March 2004 was significantly reduced to 8.7%, compared to 25.2% one year earlier.

    Technip repurchased 419,742 convertible bonds for a total amount of EUR 71.4 million during the first quarter of 2004. These bonds were cancelled cutting the total outstanding amount as of March 31, 2004 to EUR 644.1 million. Accordingly, the amount of the associated redemption premium liability fell to EUR 76.1 million as of March 31, 2004.

    During the second quarter of 2004, Technip signed a new 5-year EUR 850 million revolving credit facility which replaced two existing lines maturing in 2006. The Group has also issued a 7-year EUR 650 million Eurobond which carries a fixed interest rate of 4.625%. Taking into account that the convertible bonds issued in 2002 will mature at the end of 2006, the Eurobond proceeds increase the Group's financial flexibility. (1) The remaining portion of contracts in force. (2) In line with its overall strategy, the Group decided to divest 3 non-core affiliates previously reported under the Onshore / Downstream and Industries Branches. The combined backlog of these activities was EUR 160 million as of December 31, 2003. It is estimated that their combined revenues and EBITA for the first quarter of 2004 would have been approximately EUR 41 million and EUR 1 million, respectively. (a) Before goodwill amortization