February 7, 2020 / 9:49 AM / 15 days ago

UPDATE 2-Norway's Aker Solutions stock dives to record low on revenue warning

* Sees lower margin year-on-year

* 2020 revenue to fall 14% vs 2019

* Demand for lower emissions limits new oil, gas projects (Updates share, adds detail, context)

By Nerijus Adomaitis

OSLO, Feb 7 (Reuters) - Shares in Norway’s largest oil services firm Aker Solutions lost nearly a quarter of their value on Friday, hitting a record low after the company warned 2020 revenue was likely to fall by 14% year-on-year.

Suppliers to the oil industry are struggling to recover from the market’s fall in 2014-2016 as competition is cut-throat for any contracts on offer and energy firms, under pressure to cut carbon dioxide emissions, are cautious about developing large oil and gas projects.

Overall 2020 revenue was expected to fall back to 2018 levels, when they stood at 25.2 billion crowns ($2.71 billion), compared to 29.3 billion crowns last year, Aker Solutions said.

Aker’s 2020 underlying EBITDA margin was expected to remain at around 6.5%, the same as in the fourth quarter and down from 7.1% a year ago, it said.

“The global markets remain active, but very competitive,” the firm said in statement. Oil firms were taking longer to award contracts, it added.

Aker Solutions shares fell 23.4% by 1038 GMT, making it the worst performer on the Oslo exchange and underperforming European oil stocks, down 0.98%.

SLIMMER PICKINGS FROM BROWNFIELDS

The fall in underlying margin was partly the result of a high share of lower-margin brownfield activity - expansions or redevelopments of existing oil and gas fields.

Earnings before interest, tax, depreciation and amortisation (EBITDA), excluding one-offs, fell to 434 million crowns in the final quarter of 2019 from 495 million crowns a year earlier.

CEO Luis Araujo declined to comment on the share price fall during a call with analysts, but said the company was trying to cut costs further.

It also plans to take a 50-100 million crown restructuring charge in the first quarter, related to moving its subsea fabrication from Norway to its two remaining plants in Brazil and Malaysia.

The company’s contract backlog fell to 25.4 billion crowns ($2.74 billion) at the end of 2019, the lowest level since the first quarter 2018, although Araujo said he expected improvements this year.

Aker expects some big projects to be awarded over the next six to nine months and is bidding for contracts totaling about 60 billion crowns.

At the same time it is seeking to adapt to the demand for lower emission energy.

Last October, Aker Solutions announced a strategy to increase its revenue from renewables and low carbon solutions, such as carbon capture and storage, to 45% from around 10% expected in 2020.

It also increased its stake in Principle Power, a U.S.-based company developing floating offshore wind foundations, to 25% last year.

$1 = 9.2821 Norwegian crowns Editing by Gwladys Fouche and Barbara Lewis

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