Akastor ASA

Good morning and welcome to AUK Solutions presentation of our fourth quarter and full year results. My name is Preben Ørbøk and I'm the Head of Investor Relations. With me here today is our CEO Kjetil Digre and our CFO Idar Eikrem. They will take you through the main developments of the quarter and the full year. After the presentation, as always, we have time for questions. Those of you who are following the webcast can submit your questions via the online platform. And with that, I leave the word to Kjetil Digge.

Thank you, Preben, and welcome to everyone tuning in. As we are putting 2024 behind us and are embarking on 2025, I wanted to start the presentation today, highlighting some of the achievements we have made since the merger between Aker Solutions and Kvarner back in 2020. At that time, we set ambitious targets for the new company, and I'm very proud to see that we have delivered over and beyond our targets, generating solid returns to our shareholders. I think these achievements are a clear testament to the competences and capabilities of the entire organization of AXSolutions. And to give you a few numbers. We are currently about 11,800 people in more than 15 countries. Out of this global workforce, I wanted to highlight our engineering organization, which today counts about 5,000 people. India is our second largest engineering hub after Norway, with about 1,000 highly skilled engineers. When it comes to the large EPC projects, both in oil and gas and renewables, India currently account for more than one third of our engineering hours. So our operations in India is very important for us as it enables us to deliver high quality engineering services at competitive prices across market segments and geographical regions. Another critical aspect of growing and developing our company is access to new talents. And I'm happy to see that our focused efforts seem to resonate well with both engineering students and professionals, rating us as the second most attractive employer in Norway for the second year in a row. Continuing our recruitment efforts in 2024, we have welcomed about 1,700 new employees to our company, bringing with them new ideas and ways of working across the energy space. We continue to invest in training and competence development, as well as implementing new digital tools and solutions, such as artificial intelligence. In this way, we are developing an organization around the common purpose of solving global energy challenges for future generations. As we are a people business, I'm very happy to see that these efforts are also reflected in our financial performance. Since 2020, our revenues have grown from about 20 billion to more than 50 billion. In 2024 alone, our revenues grew by almost 50%, driven by high activity across segments and locations. And equally important, our margins have also improved significantly over the period. In 2024, we delivered an EBITDA margin of 8.7% or 7.3%, excluding the net income from one subsidy. which is an increase of more than 500 basis points from 2020. We also secured several important new orders in 2024, with an order intake of about 40 billion during the year. In addition, some of you might have noticed that we had a flying start of 2025, with several new contracts signed so far this year. Our order backlog remains high and was about 61 billion at year end. And I like to stress that one thing is the size of the backlog, but much more important is the quality. More than half of our current backlog relates to the projects under the alliance model with Akron BP. This way of working isn't just about contracts, it's about partnership. By aligning our incentives, sharing risks and rewards, we create win-win situations that drive innovation and efficiency. This way of working closely together with our strategic partners helps us deliver high quality projects faster, which in turn means more energy to markets quickly and responsibly. We have already reached several important milestones on these projects during 2024, and we have made a little video to give you a feel of the scale of these projects. So please take a look. So as you can see, it's a comprehensive portfolio of projects with some spectacular operations and a portfolio where we have taken significant steps when it comes to development and the use of digital tools. This is in line with our key focus, which is to safeguard the delivery of our backlog while positioning the company for future opportunities. Speaking of the future, let's take a look at our tender pipeline, which has increased to about 86 billion at the end of 2024. Out of the tender profile you see here, we have already secured several new contracts during the first month of 2025, including the final notice to proceed on Norfolk, Vangard East and West, and the contract for the carbon capture and storage facilities at Hafslund Celsius waste to heat plant in Oslo. On the remaining tender pipeline, we continue to see a good mix of traditional oil and gas developments, decarbonization efforts and projects, and renewables opportunities. Within oil and gas, we are supporting our clients to mature the next wave of greenfield and brownfield projects. We are also in the process of renegotiating several long-term frame agreements for maintenance and modification services with strategic customers. And within renewables markets, we continue to see high activity, both in tendering and in early phase studies, and despite operators taking a more cautious approach to these new projects. We see that both in offshore wind and in CCS, there's a key focus on developing fabrication-friendly designs that enable serial production to drive down costs together. The recent award for the carbon capture and storage project at Klemensrud is a clear example where we will utilize SLB Kapturis Just Catch 400 modular technology to decarbonize one of the largest emitters in Oslo. I'd like to emphasize that when it comes to tendering, we continue to be very selective about which projects we go after. And as a result, the new contracts coming in have balanced risk reward profiles compared to our legacy renewables projects. These legacy projects were attended on a project by project basis on lump sum terms with immature designs and execution models. And we have been open about the challenges in these projects and have taken additional losses during the year. We are now in the final stages of execution of these projects, which will be delivered in 2025. And as we put these legacy projects behind us, there are clear improvements in commercial models for the second wave of projects coming in. In January this year, we announced that RWE had decided to proceed with the remaining scope on the two HVDCs for the Norfolk-Vanguard East and Vanguard West developments in UK, as I mentioned. And this with potentially three projects to be executed in sequence. The partners have a strong incentive to work closely together, focusing on standardization and industrialization to reduce overall costs of energy. Working together with our partners Siemens and Dry Dogs World in Dubai, we are already seeing the benefits of standardization in the execution of these projects. For instance, in the number of engineering hours from the first to the second topside. Looking back, standardization was one of the key success factors in improving our subsea business, and we are now applying these learnings into the new energy markets. We think these are important steps in the right direction for the renewables markets, and we will continue to develop such models and relationships across our market segments going forward. A key element in building these relationships is early access to customers. Back in May 2024, we launched ENTER, our new brand for our energy consultancy. This is an organization of over 300 dedicated employees drawing on the combined capacity and competencies of the wider Arca Solutions to give customers pragmatic advice based on our vast project experience. And I'm pleased to see that our services continue to be in high demand. For the second year in a row, our consulting revenues increased more than 50% with double digit margins. In 2024, we worked on more than 300 projects for a wide variety of customers with a good balance between renewables, transitional and low carbon solutions, and more the traditional oil and gas studies. I think one aspect that makes us stand out is our ability to bring learnings from real project execution to provide early phase advisory. That capability is deeply appreciated by our customers. For example, the Klemmetsrud waste to energy carbon capture project that I referred to earlier actually originated as an ENTER study where innovative layout design helped the economics of the project. All in all, I'm very happy to see the progress made by our energy consulting business, spearheading our efforts into emerging markets across the globe. This takes me to the general outlook for Aker Solutions. Firstly, we continue to have a solid order backlog of projects with balanced risk-reward profiles, where our key focus is to deliver predictable project execution. Secondly, our market outlook remains positive despite volatile energy prices and geopolitical instability. Our capabilities and services are in high demand, and we are working on several tender opportunities, some of which we have already secured in the beginning of 2025. We are seeing clear improvements in what we've previously referred to as the broken model in renewables, with new contract-based balanced risk-reward profiles and aligned incentives. Lastly, we continue to have a solid financial position after paying out about 11.5 billion to shareholders in 2024. This enables us to both develop the company and our people and deliver attractive returns to our shareholders. And with that, I hand the word over to Ida, who will take you through the numbers in more detail. Thank you.

I will now take you through the key financial highlights of the fourth quarter, the full year figures, our segment performance and run through our financial guidance. As always, all numbers mentioned are in Norwegian kronor. So let me start with the income statement. The fourth quarter revenue was 15.7 billion, up from 11 billion a year ago. This represents about 43% growth year on year. Full year revenues were 53.2 billion, a 47% increase from 2023. The underlying EBITDA in the quarter was 1.2 billion, up from 615 million a year ago, with a margin of 7.8%. This was driven by continued strong performance in our lifecycle segment, while negatively affected by additional losses in our legacy renewable portfolio. Net income from one subsea was $166 million in the quarter. EBITDA for the full year was 4.6 billion, with a margin of 8.7%, or 7.3% if you exclude the net income from one subsidy. The underlying EBIT in the quarter was 888 million, up from 393 million a year ago, with a margin of 5.7%. For the full year, the net income excluding special items increased to 3.2 billion up from 2.4 billion last year. The net income for the quarter was 837 million up from 385 million a year ago. Earnings per share for the full year was 6.62 kroner up from 5.2 kroner a year ago. and the Board of Directors has proposed to increase dividend per share to 3.30 kroner for 2024, up from 2 kroner per share in 2023. This represents approximately 50% of net income excluding special items in line with our ordinary dividend policy. Moving to our segment performance. For renewable and field development, the fourth quarter revenue was increased to 11.5 billion. This is up from 7.4 billion in the same period last year, representing a year-on-year growth of about 54%. Annual revenues were 38 billion, up from 22.5 billion on a year-on-year growth of about 70%. The underlying EBITDA in the quarter was 820 million, up from 362 million a year ago, and with a margin of 7.2%. As mentioned, the results were negatively affected by additional losses on legacy renewable projects in the quarter. This is mainly as a result of increased carryover work from one of our subcontractors. EBITDA for the full year was 3.1 billion, representing a margin of 8.1%. The secured backlog in this segment was 37.5 billion at year-end, with several new orders coming in during the start of 2025. Based on the secured revenue and backlog, we expect the revenue in this segment to remain relatively stable at a high level also in 2025. For the lifecycle segment, revenues in the fourth quarter were 3.8 billion, up from 3.5 billion in the same period last year. This was driven by continued high activity both in Norway and in our international hubs. Annual revenue was 13.2 billion, a slight increase from 2023. The underlying EBITDA was 277 million in the quarter, up from 197 million last year, representing a margin of 7.3%. This was enabled by continuous solid performance on ongoing modification projects and long-term frame agreements. EBITDA in 2024 was $920 million, with a margin of 6.9%. The order intake in the quarter was $3 billion, representing a book-to-bill of about 0.8 times. During the quarter, Lifecycle was awarded long-term frame agreements with both RKBP and War Energy. With War Energy, we have also signed a strategic partnership agreement in January with a potential duration up to 11 years, focused on close collaboration with Align incentives. The secured backlog at the end of the year was 22.5 billion, providing good visibility for future activity levels. This is a 9% increase compared to the start of 2024, reflecting the strong underlying market for our services in Norway and abroad. Based on the secured revenues and backlog, we now expect the lifecycle segment to grow by about 10% in 2025. Moving to our financial performance of 1 subsea, where we have a 20% stake. In the fourth quarter, one subsea delivered revenues of about 10.2 billion. For the full year, revenues were about 41 billion kroners. The underlying drivers for the subsea market remains positive, with spending forecasted by Rysta to grow by more than 10% annually between 2025 and 2027. OneSubsea has a very strong position in this market, with the largest installed base of subsea equipment and a leading technology portfolio. The expected growth in subsea activity will also positively impact Arca Solutions operations, both through our services to OneSubsea, but also through the work that we do to connect new subsea fields to existing infrastructure. In the fourth quarter, one subsea reported EBITDA of 1.8 billion, representing a margin of about 17%. This was driven by lower activity and higher one-off integration cost in the period. For the full year of 2024, the company delivered about 7.6 billion in EBITDA, representing a margin of about 18%. Going forward, the company is targeting annual synergies of about $100 million. Net income for the entity was around 900 million kroners before PPA adjustments. After these adjustments, Arca Solutions recognized 166 million for a 20% stake. Net income before PP&A for the full year was about 4.2 billion, of which Arcus Solutions recognized 789 million. The backlog for the entity is currently at 51 billion kroners, with several important awards in 2024. Alongside its Subsea Alliance partner, Subsea 7, OneSubsea signed a global frame agreement with BP to combine Subsea expertise across a portfolio of future projects. The collaboration covers all project stages from concept development to full lifecycle, supporting BP to achieve accelerated project delivery, standardization, and reduce total cost of ownership. As a proud co-owner, OneSubsee is an important contributor to Arca Solutions' financial performance and value creation. Since closing of the transaction in October 2023, the company has managed to build a solid net cash position of more than $500 million at the end of 2024. The company has an attractive dividend policy with ambition to distribute all excess cash to its shareholders. The first dividend to Arca Solutions of about 77 million kroner was received in the fourth quarter. Based on its strong financial performance and positive outlook, OneService targets to distribute more than $250 million to its shareholders in 2025. Based on a 20% ownership, Arca Solutions expect to receive a dividend of more than $50 million or more than half a billion Norwegian kroner at current exchange rate, which will be paid out quarterly during 2025. Let us now look at cash flow and financial position. Our financial position remains robust, with a net cash position of 2.9 billion at the year-end, after paying the 10 billion kroner extraordinary dividend in the fourth quarter. This includes a one-off effect of about 1.3 billion from cash in transit related to our joint venture in Dubai, which will be settled early 2025. CapEx in the period was 197 million, down from previous quarters as we have finalized our safeguard investment program. These investments, such as the Vardal production line, are critical for safeguarding the delivery of our backlog and will also improve our competitiveness for future opportunities. going forward we expect capex to be between one and one and a half percent of revenues annually the working capital decreased to negative 7.8 billion impacted by the mentioning cash in transit related to the joint venture in dubai going forward we continue to expect Working capital to normalize towards a level between negative 4 and negative 6 billion over time. Let us now look at the cash flow statement for the full year. In 2024, operational cash flow was 3.1 billion kroners. This was mainly driven by EBITDA contribution from our operational segments. CapEx for the full year was 1.4 billion, in line with our guiding. Proceed from mainly the subsidy transaction accounted for about 3.3 billion. And lastly, during the year, ArcaSolution distributed about 11.5 billion to shareholders through dividends and buybacks. So, to sum up. In 2024, we continue to deliver strong financial and operational performance despite the losses in our legacy renewable portfolio. Based on our secured backlog and market activity, 2025 revenues is expected to be between 50 and 55 billion. At this early stage, we expect the EBITDA margin to be between 7 and 7.5% for the full year, excluding net income from OneSubsea. In addition, OneSubsea has an ambition to distribute more than $250 million to its shareholders, which at the current exchange rate would imply a dividend to Arca Solutions of more than half a billion Norwegian kroner. As mentioned, working capital is expected to start to normalize to a level of between negative four and negative six billion over time. As we have completed our safeguarding investment program, we now expect capex to be between one and one and a half percent of revenues in 2025 and onwards. Based on our robust financial position and positive outlook, the Board is proposing a cash dividend of 3.3 kroner per share for 2024, pending approval in the annual general meeting to be held in April. Thank you for listening. That was the end of our presentation. In a few moments, we will open up for questions.