Aker Solutions saw a 16.5% drop in its revenue in Q4 2015 as the market activity declined, especially in the North Sea, that will result in the company to slow down activity, reduce costs, and streamline its maintenance, modifications, and operations (MMO), and subsea businesses.
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Image from Aker. |
Revenue in the quarter declined to US$918 million (NOK 7.9 billion) from $1.1 billion (NOK 9.2 billion) in Q4 2014.
Aker said its Q4 2015 was burdened by $74 million (NOK 636 million) in one-off costs, including $43 million (NOK 373 million) in restructuring and capacity reduction costs and a provision of $13 million (NOK 114 million) to cover lease costs on vacated office space. Excluding one-off items, the margin was 6.1% during the period.
"Our consistently strong execution is the result of a ceaseless focus on improving operations and bringing down costs to the benefit of both customers and shareholders," said Luis Araujo, Aker Solutions CEO. "We have a healthy order backlog, strong financial position and international presence that will benefit us even as our industry continues to face uncertainty amid very challenging market conditions."
Aker’s subsea revenue saw about a 13% decrease in Q4 to $558 million (NOK 4.8 billion) from $639 million (NOK 5.5 billion). Its revenue in field design, which consists of MMO and engineering, also took a 13% decrease to $372 million (NOK 3.2 billion) in Q4 2015 from $430 million (NOK 3.7 billion) in Q4 2014.
The company announced its plan to streamline both its MMO and subsea businesses in an effort to strengthen operations and enhance competitiveness, which is expected to save Aker nearly $70 million (NOK 600 million).
“We are leaving no stone unturned in our efforts to secure a sustainable future for our business,” Per Harald Kongelf, head of Aker Solutions Norwegian operations said. “Reducing salary costs is one of multiple measures needed to safeguard our competitiveness and reinforce our ability to win more work in a market with unprecedented challenges."
Part of its efforts include reducing its Norwegian MMO business by a further 900 jobs in 2016 to adjust to market conditions, bringing the total of its global workforce reductions to 25% since summer 2014. In addition, Aker will also enforce temporary reductions in salaries for Norwegian MMO employees beginning in March that will see senior management take a 10% cut, and the remainder of the staff see a 5% cut in salary. The company will review the adjustments after 12 months.
“The markets are challenging and projects are being postponed across the industry. But there are signs that cost-cutting efforts are having an effect as break-even costs are coming down. This may allow some major developments to be sanctioned in the next 12-18 months. With the exception of the North Sea Johan Sverdrup project, activity offshore Norway is expected to remain subdued over the next year,” Aker said in its Q4 2015 results report.
Order backlog at the end of Q4 2015 came in at $4.6 billion (NOK 40 billion), of which more than two-thirds was for projects to be delivered outside Norway, with the biggest share in West Africa.
Aker made good progress on major projects from Africa to Norway and Brazil in Q4 2015. Key deliveries included equipment to start drilling in November at the Kaombo development in Angola and components to enable first oil production in December at the Moho field in Congo, the company said.
Aker was able to ink $744 million (NOK 6.4 billion) in orders in the quarter, an increase of 3.3% from $720 million (NOK 6.2 billion) a year earlier. Orders include a maintenance and modifications framework contract with BP in Norway and a framework agreement for offshore engineering and construction services in the UK North Sea.
Aker also saw strong demand for its front-end engineering capabilities, securing 35 study awards, including for projects in Norway, Australia, Canada, the US and Africa, the company said.
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