Aker Solutions CEO Says Backlog May Drop as Crisis Persists
23 April 2010Aker Solutions ASA, Norway’s biggest maker of oil platforms and equipment, said its order backlog may decline this year as the effects of the global financial crisis persist.
“The financial crisis isn’t over,” Chief Executive Officer Simen Lieungh said today in an interview in Fornebu, Norway. “It will take time to solve the consequences of all the stops we’ve had during the last two years.”
The order backlog fell to 55.7 billion in the first quarter from 56.3 billion kroner at the end of last year, the company said in a presentation of earnings. Lieungh said to analysts that the backlog was at a “comfortable” level and that it aims to be “selective” to keep a quality backlog.
Oil companies such as Statoil ASA and Total SA have sought to limit spending and postponed projects after the global recession sapped demand. Oil and gas producers worldwide slashed spending by about 15 percent to $395 billion last year, according to a Dec. 16 estimate by Barclays Capital. Spending should rise 11 percent to $439 billion this year, Barclays said.
Aker Solutions said today net income rose to 636 million kroner from 603 million kroner a year earlier as it cut costs to counter a 23 percent drop in sales. That beat the 458 million- krone average of seven analysts’ estimates. The operating margin rose to 11.1 percent from 7.5 percent a year earlier.
The “numbers confirm the case for margin expansion beyond what’s reflected in estimates,” Frederik Lunde, an analyst at Carnegie ASA with an “outperform” said in a note. “This represents a good buying opportunity.”
The shares rose as much as 3.3 kroner, or 3.4 percent, to 101.9 kroner, the highest intraday price since September 2008.
“We have a number of projects in front of us -- of course our ambition is to maintain and grow always -- but we’re also realistic,” Lieungh said. “We’re prepared also for a decline, depending on the market and the awards. We’ve reduced our cost base to be prepared not to do major restructuring because of a potential swing in the backlog.”
Lieungh said the company is competing in deepwater and ultra-deepwater markets where there’s “high activity.”
Separately, business in the subsea area is expected to pick-up with orders likely to gain this quarter, Chief Financial Officer Leif Borge said at the presentation.
Growth in subsea will likely be led by opportunities outside Norway, Lieungh said. “In Brazil you’ll see growth, West Africa you’ll see growth, I guess Asia will be a future growth area if you look at deepwater China, Malaysia, also north of Australia.”
The company may also invest more in its process and construction segment, which has “large potential,” he said. The unit constructs power plants and provides engineering for the metals and mining industries. The unit’s sales fell to 2 billion kroner in the first quarter, from 2.7 billion kroner a year earlier.