Kvaerner Returns to Profitability in 2002

Kvaerner announced its results for the three months ending March 31, 2002. Operating profit for the Kvaerner Group in the first quarter of 2002 amounted to NOK 160 million, compared to a loss of NOK 345 million in the previous quarter. Coming out of a difficult year in 2001, the Group has restored profitability.

In the first quarter of 2002, three of the four business areas reported operating profits. Including NOK 31 million of non-recurring costs related to the integration of former Aker Maritime units, operating profit in Aker Kvaerner was NOK 81 million. Aker Maritime units were consolidated with effect from March.

Kvaerner E&C (Engineering & Construction) reported an operating profit of NOK 18 million, and Shipbuilding, NOK 137 million. Kvaerner Pulp & Paper had an operating loss of NOK 55 million during the period.

The financial restructuring of the Group was successfully completed in the first quarter. Net interest-bearing debt was NOK 940 million at the end of March, reduced from NOK 6.3 billion at the end of 2001.

Correspondingly, the equity ratio at the end of March 2002 was 22.9 percent compared with 7.0 percent at the beginning of the year. Inclusive of subordinated debt, the adjusted equity ratio at the end of the first quarter was 35.5 percent.

Several changes to the operational structure of the Group were completed, including the combination with the oil and gas units of Aker Maritime, the establishment of a jointly owned shipyard management company, and the move of the head office from London to Oslo.

In May, further changes were introduced. Motivated by a wish to service its global and regional customers more effectively, Kvaerner announced that the oil and gas activities of Kvaerner E&C in Houston and Asia Pacific would be integrated with Aker Kvaerner. The change will allow Kvaerner E&C to address more clearly the needs of its customers and concentrate its efforts on improving its existing global operations.

At the end of March the combined order reserve of the Group was NOK 47.5 billion, an increase of NOK 10.9 billion since the beginning of the year. The former Aker Maritime companies joined in March with a combined reserve of NOK 13.2 billion. The order intake for Aker Kvaerner was exceptionally good in the first quarter this year, with significant new orders relating to the Kristin field development project and long-term maintenance and operation contracts in Norway.

Meanwhile, the order reserve in the Shipbuilding and Kvaerner E&C business areas declined through the first quarter, and new orders are required.

The new financial and industrial structure of the Group represents a sound foundation for continued operational improvement. Management is spending much time with key customers to ensure that Group priorities are aligned with customer requirements.

Internally, management is focusing on making improvements for health, safety and environmental issues, reducing costs, improving productivity, and a strengthening of the risk management culture throughout the Group.

Operational performance is expected to remain relatively strong in Aker Kvaerner for the rest of the year, while the position in Kvaerner E&C and Kvaerner Pulp & Paper is expected to gradually improve. The Kvaerner shipyards will produce varying results in the coming quarters.