Kvaerner, a Norway-based engineering and construction services company, has reported a sharp drop in its third quarter 2015 revenues, due to lower activity, as well as lower profit when compared to the same period last year.
According to Kvaerner’s 3Q 2015 report on Friday, its revenues in the third quarter were NOK 2.86 billion, compared with NOK 4.004 billion for third quarter 2014. Kvaerner says lower revenues are mainly due to lower activity within business area topsides, where larger projects are recently finalised.
The company’s net profit total operations in third quarter 2015 was NOK 74 million compared to NOK 100 million in the corresponding quarter last year.
Kvaerner’s EBITDA for the third quarter was NOK 187 million, versus NOK 194 million in the same period last year.
Jan Arve Haugan, President & CEO of Kvaerner, said: “We have through 2015 won several of the contracts. We see a reduced number of prospects for the next 12 months.
“Simultaneously, there are some interesting opportunities which may be a good fit for our expertise. We will implement the ongoing programmes for increased competitiveness, and use this to position for target projects,” Haugan concluded.
Cost reductions and new round of job cuts
In its 3Q report, Kvaerner informed that starting January 1, 2016, it would change to a matrix based organisation model with enhanced focus on project execution. The new operating model is being combined with cost reductions. The company says that the revised operating model will provide clearer roles and accountabilities and its aim is to increase productivity through better internal cooperation and use of common resources. Also, as part of the revised model, there will be changes to the executive management team from January 1, 2016.
Furthermore, Kvaerner said the second round of staff reductions has started in October and will reduce the work force by about 100 employees, including attrition. In addition, there are some temporary lay-offs and notices of temporary lay-offs within Topsides and Jackets. Associated costs of NOK 11 million have been expensed in third quarter 2015, the company said.
Kvaerner says it is expected that additional restructuring and capacity reduction costs will be recognised in fourth quarter. The level of these costs will depend on the outcome of tender activities and the reduction of non-project positions in the revised operating model. Kvaerner notes it still expects to reduce capacity with 250 to 500 employees in 2015.
According to Kvaerner, the downturn in 2015 is expected to continue in 2016. This means that in the coming year, there are only some few relevant prospects. Most of these prospects identified for the near term are smaller than the historical EPC projects. There is however significant uncertainty in estimating how the markets will develop over the next couple of years, but Kvaerner says it believes that the demand for EPC deliveries will increase after the current low cycle. Kvaerner is already involved in front end work both for unmanned well head platforms, Subsea on a stick, near shore LNG and other solutions for the Arctic. However, timing of international prospects is uncertain, the company said.
For 2015, Kvaerner estimates revenue levels of around NOK 15 billion (including revenues from jointly controlled entities) an increase from previous quarters due to adjustments to project phasing and contributions from new contracts.
Offshore Energy Today Staff