Subsea 7 S.A., a subsea engineering, construction and services company, has reported rise in Q1 2015 profits despite revenue drop.
The company reported net income of $151 million in the Q1, 2015 in comparison with $131 million in Q1, 2014.
Revenue for the quarter was $1.2 billion, a decrease of $487 million compared with Q1 2014. According to Subsea 7, the decrease reflected lower activity levels in both Business Units and was adversely impacted by the strengthening of the US dollar against major currencies during the quarter.
Adjusted EBITDA for the quarter was $281 million, an increase of $18 million compared to Q1 2014.
Adjusted EBITDA margin was 24%, compared with 16% in Q1 2014 which reflected improved margins in the Southern Hemisphere and Global Projects Business Unit as certain projects completed their offshore phases.
Net operating income was $176 million, an increase of $16 million compared to Q1 2014.
Jean Cahuzac, Chief Executive Officer, said: “Subsea 7 has started the year well compared with the prior year quarter, with an increase in Adjusted EBITDA in the first quarter of 2015 despite the difficult market environment and decline in revenue.
“Operational performance has remained strong with good execution and cost control discipline. Vessel utilisation in the period was 68%, in line with the fourth quarter 2014. Adjusted EBITDA margin of 24% reflected increased contribution from projects nearing completion, including the Guará-Lula NE project in Brazil where there was a further $29 million reduction in the full-life project loss.
“The continuation of challenging market conditions resulted in subdued order intake and order backlog declined to $7.6 billion by the period end which included an adverse foreign exchange impact of $0.4 billion. New orders and escalations totalled $1.0 billion and included the Persephone project for Woodside, offshore Australia, and the extension of two Life of Field contracts for Shell, offshore UK, both announced in the quarter. Unannounced order intake included fabrication work for Sonamet in Angola and an award for the i-Tech division, offshore Australia. Since the quarter end, a two-year PLSV contract has been awarded offshore Brazil for Seven Seas.
“Net debt increased by $283 million from the 2014 year end position, reflecting the timing of payments for the new-build vessel programme and movements in working capital in the quarter, largely due to the normal phasing of project related cash receipts and payments.
Life of Field activity is expected to show a seasonal improvement in the second quarter, Subsea 7 said. The company further stated that revenue is expected to be significantly lower in 2015 compared to the record level reported last year and Adjusted EBITDA margin is expected to decrease compared to 2014. In addition, Subsea 7 says that cost reduction measures to more closely align its cost base to current market conditions are making good progress and additional measures will be implemented in 2015.