The Kvaerner oil service group still believes they will be able to grow with an annual turnover of more than NOK 10 billion in the not too distant future, but 2020 there will be no celebration.
– I am pleased to say that we plan to increase Kvaerner's business to annual revenues of more than NOK 10 billion. However, we expect revenue and margins to be slightly lower for 2020 compared to 2019, before we see the planned growth beginning from 2021 onwards, said Kvaerner CEO Karl-Petter Løken.
On Monday morning, the oil services group released third quarter results. After Kvaerner increased its revenue forecast for 2019 to more than one billion to eight billion in May, the company now comes with forecasts for 2020.
– In the third quarter we had a turnover of around 2.6 billion and expect the same in the fourth quarter. This means that we will exceed 9.0 billion sales this year. We do not expect the same level of income next year. How much lower in 2020, we must return again, said CFO Idar Eikrem during the quarterly presentation.
Kvaerner received new orders for NOK 1.83 billion in the third quarter, up from NOK 1.15 billion at the same time last year. The order backlog, on the other hand, has shrunk from NOK 10.64 to NOK 8.34 billion.
The fact that the order book is shrinking is partly due to the fact that Kvaerner now has or is in the process of completing several important projects such as Valhall Vestflanken and the first phase of Johan Sverdrup. At the same time, the company has begun working on the second phase of Sverdrup, in which the Kvaerner contract is smaller in scope.
From the order book, Kvaerner expects four billion to be completed by 2020. This year's revenue is estimated at more than eight billion, so Kvaerner needs further work for at least four billion more if the company wants to maintain this year's pace. That's why the company doesn't believe that will happen.
Kvaerner is also not the only one who estimates next year's turnover decline in the Norwegian supplier industry. So is Kvaerner's "sister company" at Aker Solutions. Among other things, they show that some projects have been pressed in a timely manner, while the company also said they needed more contracts.
Kvaerner CEO Karl Petter Løken launched the plan one year ago to make the company reach "old heights" with a turnover of more than 10 billion.
In comparison, Kvaerner had sales of NOK 17.5 billion in the peak year of 2014, just before the oil brakes reached full in the Norwegian oil industry.
Turnover may exceed nine billion
Kvaerner's adjustments (Field Development, which includes ownership interests in the project company) show revenue growth from NOK 1.71 to NOK 2.57 billion, compared to the third quarter of last year.
Gross operating profit (EBITDA) increased from NOK 90 to 138 million. Profit after tax (not adjusted) increased by NOK 35 to 72 million.
Kvaerner still has no interest bearing debt at the end of the quarter, and the company has available loans of NOK 2.0 billion in addition to a cash balance of around NOK 2.4 billion.
So far this year, the company has had an adjusted turnover of NOK 6.64 billion. Because Kvaerner estimates 31 percent of the guaranteed order deposits, equivalent to NOK 2.58 billion, will be executed this year, the company will reach its own estimated earnings with a good margin.
The company already has an estimate of more than eight billion, but if you place the order book for this year on top of the turnover the company already has, the turnover will soon exceed 9.2 billion.
Can secure large contracts on the US Equinor wind project
To achieve the growth outlined by Kvaerner's management, the company outlines existing and new areas.
The company envisions growth in traditional core areas with construction, renovation and removal of oil and gas installations. In this segment, the company also hopes that the unmanned platform, and the increasing need for removal of installations in the North Sea, will grow.
For example, Kvaerner was heavily involved in increasing the billion Njord fields to Equinor. Equinor has expanded its scope of work and estimated costs have increased by NOK 4.4 billion, giving Kvaerner more work.
In addition, in September, Kvaerner received contracts in the hundreds of millions to remove the Gyda platform.
The second growth area is related to floating production units (rigs and ships) and Kvaerner is investing in the dock at Stord to be stronger in this segment.
Kvaerner has secured one billion contracts on production vessels for the new Johan Castberg field in the Barents Sea. In addition, the company hopes for a number of contracts from Equinor, which may require three vessels, such as the Wisting, Bay du Nord and Rosebank fields.
Finally, the company invests in renewable and offshore fish farming.
The company has designed a solution for concrete chassis for the Equinor offshore wind project, Hywind Tampen and now Kvaerner reports that they are working on what is called Pre-Feeding for Equinor at Empire Wind – a giant offshore wind project outside New York.
– We are in dialogue with customers for future projects. We hope that some projects will be decided during the fall, alongside some important projects that have passed important decision points in 2020 and 2021, said Kvaerner CEO Karl Petter Løken
KvaernerAker Solutions quarterly report estimates a decline in revenue after two years of growth Kvaerner wants to go back in time