Preliminary annual accounts and fourth quarter report 2003
Operating profit before amortisation of goodwill and pensions (EBITA) amounted to NOK 506 million for the group. This is down from NOK 723 million for the previous year.
Operating profits in 2003 for Engineering & Construction and the Finnish shipyard Kvaerner Masa-Yards were considerably better than in 2002. However a deficit of NOK 728 million at the Kvaerner Philadelphia shipyard weakened these results.
Goodwill and pension amortisation without cash effects amounted to a total of NOK -600 million. Exceptional items incurred in concluding major disputes amounted to NOK -463 million.
After such special items and net financial expenses, which amounted to a total of NOK -372 million, the group posted an overall net deficit of NOK 998 million in 2003, compared to a profit of NOK 877 million in 2002.
Improved cash position
Despite weaker profits, the group has strengthened its cash position. After a small, partial debt payment made during the final quarter, cash, bank deposits and short-term interest-bearing assets amounted to a total of NOK 6.5 billion at the end of 2003, up from NOK 4.9 billion one year ago.
The group's net interest-bearing assets at the end of the year amounted to NOK 2.5 billion, and its equity ratio was NOK 25.5%.
Since the refinancing in 2002, Aker Kvaerner has continued to strengthen its financial position. This has provided the parent company with a strong basis for redeeming debts of approximately NOK 3 billion which fall due at the end of 2004.
Order reserve and outlook for the year
The total group order reserve amounted to NOK 39.3 billion at the end of 2003, compared to NOK 34.6 billion one year ago.
Aker Kvaerner has implemented a number of measures designed to boost the group's competitive ability and profitability, not only by improving efficiency, but also by implementing improved systems for risk management and project execution.
It is anticipated that these measures will result in a continued gradual improvement in operating profits for Oil & Gas and Engineering & Construction. Shipbuilding will be affected by lower activity at the Finnish shipyards and uncertainty relating to developments at the shipyard in the USA.
Aker Kvaerner's results for 2004 will in part also depend on the group overcoming historical non-operational challenges. Many such issues were resolved in 2003, and the group is working systematically towards resolving those that remain in the best interests of the group.
The global economy is still suffering from uncertainty, although several important markets for Aker Kvaerner experienced positive developments during 2003. However, the group still assumes continued uncertainty, and work will continue on improving competitiveness and making operations more efficient.
Comments to the 4th Quarter 2003
The order intake in the fourth quarter 2003 was NOK 10.2 billion, on a level with the other quarters of the year, but somewhat lower than the third quarter, which included a contract for the building of a cruise-liner worth close to NOK 5 billion.
Operating profit before amortisation of goodwill and pensions (EBITA) was NOK 205 million in the fourth quarter. This was better than in the same period of the preceding year and overall on a level with the third quarter 2003.
Improvement continued in Oil & Gas and Engineering & Construction. EBITA in these sectors was 35% higher than in the third quarter, reflecting positive developments in most of the reporting units. Shipbuilding was affected by weaker results at Kvaerner Masa-Yards and continuing weak results in Philadelphia.
Amortisation of goodwill and pensions was reduced in the fourth quarter as a result of the actuaries' annual review and updated actuarial assumptions of the UK pension fund's commitments.
A loss of NOK 376 million was recorded for special items, of which the total accounting effect following the previously mentioned settlement in connection with the construction of a copper mine in Nevada, USA amounted to NOK 330 million.
Net financial items are on a level with the preceding quarters, while the share of earnings in affiliated companies was lower. This was mainly due to provisions in connection with the restructuring of the Aker Ostsee shipyard in Germany.
Net current operating assets were reduced by close to NOK 1.5 billion in the course of the fourth quarter 2003. This was partly due to significant cash flow from customers shortly before year-end. Aker Kvaerner's accounts reflected corresponding effects in the previous year.
The group continued to improve its cash position during the quarter. At the end of the year the sum of cash, bank deposits and other short-term interest-bearing receivables was NOK 6.5 billion. Net interest-bearing items amounted to NOK 2.5 billion and net debt, including the10-year subordinated loan, NOK 1.4 billion.
EBITA for Oil & Gas in the fourth quarter was NOK 188 million, of which Field Development Europe contributed more than half. MMO Europe and Subsea & Oilfield Products delivered results on a level with the preceding quarters, while losses in Oil, Gas & Process International were somewhat reduced due to better capacity utilisation in Houston. New orders during the quarter included three jackets for the Buzzard field in the UK sector, and hook-up and commissioning of the onshore plant for the Snøhvit development in Norway.
EBITA for Engineering & Construction was NOK 105 million in the fourth quarter. Most of the businesses returned figures on a par with or better than the preceding quarters. The operating results in both Engineering Services and Power reflect a number of minor special items, respectively negative and positive. New orders during the quarter include a number of contracts related to pulp production, of which the largest was for the delivery of a power plant to a factory in Sweden, as well as additional order intake connected to the construction of a coal-fired power plant in the USA.
Shipbuildingin the fourth quarter reported positive results at Kvaerner Masa-yards and losses at Kvaerner Philadelphia. Both the activity level and results at Kvaerner Masa-Yards were lower than in the preceding quarters due to the delivery of another cruise-ship during the quarter. At Philadelphia progress on ship number two has been satisfactory. Low productivity was a major challenge for the yard all throughout 2003. This has resulted in cost overruns and provisions for anticipated increased costs on ships number two and three, which are due to be completed in 2004 and 2005 respectively.