2/14/2025

speaker
Christina Chardom
Head of Communications

Good morning and welcome to the presentation of Auker's fourth quarter results for 2024. My name is Christina Chardom and I am head of communications at Auker. With me today, I have Auker's president and CEO, Eivind Eriksson, and our CFO, Sven-Oskar Stocknes. We will begin today's presentation with Eivind, who will take you through the quarterly highlights and recent developments in the portfolio. Sven Oskar will then cover the quarterly financials in more detail. After the presentation, we will host a Q&A session. You can submit your questions via the chat on your screen during or after the presentation. And with that, I hand it over to Eivind Eriksen.

speaker
Eivind Eriksson
President and CEO

Thank you, Kristina, and good morning, everyone. I want to begin with a few words on the current market dynamics. In my 16 years at the helm of Aker, I have never witnessed this degree of volatility, uncertainty and fragmentation. We are witnessing a shift towards protectionism and transaction driven approach to trade and industrial development. The days of free trade and globalization with easy access to markets, people, capital and technology may effectively be over. This is also the backdrop for which ARCA presents the fourth quarter 2024 results and our strategic priorities going forward. Aker's net asset value was 58.2 billion Norwegian kroner at the end of the year, after dividends paid, and 60.8 billion kroner before dividends. This compares to 57 billion the quarter before. Our share price was up nearly 7%, including dividends. Overall, 2024 was a very active year for Aker. We successfully completed several important transactions aligned with our strategy of a more streamlined and focused portfolio with solid potential for increased upstream cash moving forward. We have already announced further activities after quarter end. First, Fili Shipyard. Following the sale to Hanwha, the company announced that most of the transaction proceeds will be distributed to shareholders. Consequently, the natural next step for Fili is a liquidation of the company. Second, Solsta Maritime announced plans to list the company on the Oslo Stock Exchange during the second quarter this year. As a part of this, AMSC will distribute all its Solsta Maritime shares and excess cash to shareholders in connection with the IPO. AMSC owns nearly 20% of the shares in Solstheim Maritime. Furthermore, since there will be no operational business or activities left in AMSC, the intention is to liquidate the company following the IPO. Lastly, following the sale of 80% of its carbon capture business to SLB, Akko Verizon's portfolio company, Akko Carbon Capture, announced its next strategic steps to balance immediate shareholder returns with strategic investments. ACC's dividend distribution of 3.5 billion kroner 90% of its market cap allows the company to maximize shareholder value while reinforcing its ability to act as a responsible owner of the joint venture SLB Kapturi. Over to dividends. Aaker has a solid track record of distributing shareholder value. Since our relisting in 2004, Aker has paid a total of more than 25 billion kroner in cash dividends. In 2024, Aker distributed 3.8 billion kroner in dividends, representing 51 kroner per share. The Board today announced that it has proposed a cash dividend of 26.5 kroner per share based on the 2024 annual accounts. And, in line with the practice in recent years, a second tranche will be considered by our Board in the second half of this year. Continuing on the topic of shareholder value creation. 2024 was an active year in the Aker portfolio with more than 27 billion kroner worth of transactions during the year, including the proceeds from the One Subsea JV. Combined, Aker portfolio companies distributed upwards of 32 billion kroner in dividends to its respective shareholders. This includes extraordinary dividends from Aki Solutions and Aki Biomarine. However, the substantial dividend distribution also reflects our strategy of prioritizing fewer cash-generative investments to drive value creation. Despite the current geopolitical uncertainties and market challenges, The ability to distribute such significant dividends demonstrates the resilience and strong financial performance within our portfolio. With our investments spanning various sectors, our focus on diversifying dividend sources is also paying off, contributing to the ability to generate consistent returns over time. Now, taking a closer look at our portfolio composition. Our portfolio of listed companies, as seen on the left-hand side, ended the year with a gross asset value of 601 kr per share, while our unlisted investments had a gross asset value of 198 kr per share. Subtracting the debt and comparing this to our current share price, we believe there is a good potential for continued shareholder value creation moving forward. Our unlisted portfolio has several potential catalysts for crystallizing value moving forward. I already mentioned Solstam Maritime, currently reported at a book value of 2.3 billion kroner, with increasing dividends and the IPO expected to be completed during the second quarter this year. Another example is Cognite, which is seeing strong commercial development and is well positioned within the data and AI revolution. I will come back with more details on this on a later slide. Aker BP remains a cornerstone of the Aker portfolio. The company continues to demonstrate strong operational performance, marked by consistently high production efficiency and industry-leading low costs and emissions. The company recently announced a strategic update where the key takeaways were as follows. Firstly, outstanding performance in the quarter and for 2024 overall. RKBP has a continuously improving low-cost portfolio at 6.2 US dollars per barrel and is a global leader in producing with low emissions with a current CO2 intensity of 2.6 kilograms per barrel. Projects are progressing according to plan. Operating cash flow was record high and its financial position strengthened. The company also announced a base dividend growth of 5% in 2025. Secondly, RKBP is set to deliver production growth into the next decade. The production performance was strong across the portfolio, with 93% production efficiency, and Johan Sverdrup continued to outperform expectations with a new all-time high. The company is maintaining its production outlook of more than 500,000 barrels of oil per day into 2030 and beyond, based on increased Johan Svedrup recovery of 75% and a target of 1 billion barrels from the new Yggdrasil area. And last but not least, through enhanced performance using digitalization, AI and remote operations, RKBP is setting the standard for the future together with its partners. It's pioneering the development of the first unmanned production platform ever constructed. Additionally, The Yggdrasil field will be operated from a highly digitalized control center onshore. These advancements underscore RKBP's commitment to innovation and sustainability, positioning it as a leader in the energy sector. Despite strong momentum in many of our investments, We have also learned some expensive lessons in recent years, especially related to the energy transition. As an active owner, we are focusing on how best to leverage our strength, especially through Akko Solutions as a supplier and the industrial capital partners or ICP companies as an investor, but also considering the best way forward for Akko Horizons. Our strategic thinking is about energy addition more than energy transition. Still, as an industry, too many debates center on one energy source versus another, rather than considering the entire integrated complex system with a goal of achieving the greatest possible effect. meeting demand while reducing emissions at the lowest cost and the shortest time possible. It is this system thinking that forms the basis for ARCU's industrial growth and strategy within energy. First, we consider how to get more out of the existing system. For example, by investing in technology that increases capacity utilization in already installed infrastructure. Secondly, how to reduce emissions. For example, decarbonizing oil and gas production through energy efficiency initiatives, electrification, or carbon capture, or by investing in new sources of energy. Today, Aker is positioned to capture value along the entire value chain of decarbonisation and low-carbon investments, both through the investor and operator role, as well as Aker Solutions' position as an EPC provider. A few words on each of these investments from an ownership perspective. Starting with Aker Solutions. Oil and gas projects with focus on low emissions and low costs remain the core business of Akko Solutions. Like many of its peers, Akko Solutions' ventures into the renewable sector have encountered significant challenges, such as elevated inflation and supply chain disruptions, leading to negative profitability in this part of the company. In response, The company has adopted a more selective approach to contract models and simplified work processes. Aker Solutions still secured approximately 17 billion Norwegian kroner in projects with offshore wind and carbon capture so far in 2025. And we believe there's potential for future growth in renewables going forward alongside the core oil and gas focus. Next, industry capital partners or ICP. The company's early ambitions within green energy investments proved, in hindsight, to be overly optimistic. As the market has corrected, the complexities of this transition have become clearer. ICP has now adopted a more focused strategy centered around two companies, ICP Infrastructure and ICP Asset Management. The decision to move away from venture capital and private equity is to better align with its own and Aker's strengths. Infrastructure is closely aligned with Aker's core competency, while publicly listed equities is the core expertise of the team from the Norwegian Oil Fund. Both companies are attracting interest from institutional investors globally. ICP Infrastructure is initially seeking platform companies in data centers and renewables, while ICP Asset Management plans to launch its second active global equity fund, a concentrated high-conviction portfolio, in the first half of this year. And lastly, active horizons, where the key focus going forward is on de-risking projects and maintaining capital discipline to drive value creation. In mainstream renewable power, cost optimization measures are being implemented, while ensuring successful delivery of projects under construction and move new solar and wind projects towards final investment decision. In Northern Norway, the Narvik Green Ammonia project is progressing, and with the increasing demand for AI and cloud computing, ArcHorizons is also working on data center opportunities on the Narvik properties. Additionally, following the sale of 80% of its carbon capture business to SLB, Aker Horizon's portfolio company, Aker Carbon Capture, announced its next strategic steps to balance immediate shareholder returns with strategic investments. A dividend distribution of 3.5 billion Norwegian kroner allows the company to maximize shareholder value while reinforcing its ability to act as a responsible owner of SLB Kaptury. And finally, Aquarizons met a broad range of fixed-income investors in January regarding a potential new bond issue. Based on the response, the company did not pursue a potential bond offering, and it's currently working to optimize the overall capital structure. Moving on to Cognite. The AI race between US and China has captured headlines in recent weeks. Both nations are heavily investing in AI to gain technological supremacy. which has significant implications for global industries. It heightens the demand for advanced data and AI technologies, as well as increased data center capacity. However, the competition is not just about developing advanced AI models. It's also about ensuring these models are trained on high-quality, contextually relevant data. Companies that can efficiently manage and utilize the data will be the primary beneficiaries of this AI race. AI is only as powerful as the data in processes. Many organizations struggle with fragmented, inconsistent and incomplete data, which hampers their ability to leverage AI tools efficiently. By investing in robust data architecture, implementing stringent data governance practices, and prioritizing data quality, data can transform into a valuable asset. Clean, well-organized data will enable AI to enhance operational efficiency, optimize resource allocation, and drive innovation across industries. Cognite's core product, Cognite Data Fusion, or CDF, excels in orchestrating both unstructured and structured industrial data. It's designed to handle complex, asset-heavy industrial data projects, and the advanced data modeling capabilities bridge the gap between raw data and actionable insights. CDF models the entire value chain from design to construction to operation and allows users to seamlessly share data with partners and suppliers in real time. Thus, by leveraging Cognite's expertise, companies can ensure data is not only clean, but contextually rich and ready for AI applications. Cognite's strong commercial development continued to accelerate in 2024, ending the year with solid momentum. The company's annual recurring revenue reached all-time high, increasing to 94 million US dollars at the year end. This is an increase of close to 40% from the year before. In addition, the company's total revenue, as well as a number of active users, also reached record highs. Cognite was recently ranked as the market leading data ops and AI platform for enterprise scale, complex industry data management projects globally. We are just scratching the surface of Cognite's potential. In closing, we are in a new era of global uncertainty and volatility. As we look ahead, it's evident that our geopolitical radar needs to be finely tuned and our strategic thinking flexible. AKI remains committed to navigating this new era with resilience, leveraging core strengths in our industrial portfolio, using our active ownership, fostering robust partnerships, and embracing technological advancements. We closed 2024 with high activity and more streamlined portfolios following several important transactions during the year. As we embarked on 2025, we faced a complex macroeconomic environment with political and economic uncertainties beyond our control. However, it's important to remember that challenges often give rise to opportunities. By leveraging our robust industrial foundation, we are well positioned to continue to deliver shareholder value. That concludes my portion of today's presentation. I now hand it over to Svein-Oskar Stoknes, who will take you through the quarterly financials.

speaker
Sven-Oskar Stocknes
CFO

Thank you, Eivind, and good morning. I will start off spending a few minutes on Akers Financial Investments before I go through the fourth quarter results in some more detail. The Financial Investments portfolio accounted for 18% of Akers total assets or 11.7 billion kroner, up 381 million from the previous quarter. As before, the main components under financial investments are cash, listed financial investments, other equity investments, real estate, interest-bearing receivables and non-interest-bearing assets. All of which I will now go through in some more detail. Then, as usual, starting with cash. Our cash holdings represented 1% of Aaker's cross-asset value, or 617 million kroner, down 8 million from the previous quarter. The cash inflows were dividends received of 5.1 billion kroner, of which 4.1 billion from Aaker Solutions, 888 million from Aaker BP, 98 million from Solsta Maritime and 15 million from AMSC. The main cash outflows in the quarter were primarily dividends paid of 2.6 billion, debt repayment of 1.9 billion kroner and loans to and investments in portfolio companies of 293 million kroner. of which an equity investment in Aaker Property Group of 285 million was the largest component. Cash outflow for operating expenses and net interest were 248 million kroner in the quarter. Listed investments included in our financial portfolio represented about 3% of Aaker's total assets at the end of the quarter, or 2.2 billion kroner. This was up 52 million from the previous quarter, driven by value increase on our investment in Philly Shipyard of 75 million. And as a reminder, our investment in Solsta Offshore is reported as part of industrial holdings from the first quarter of 2024, and the comparative figures have been represented. Next, other financial investments that combined represented 14% of Aker's cross-asset value, or $8.9 billion in total. Aker's real estate holding, Aker Property Group, stood at the book value of $1.8 billion at the end of the quarter, up from $1.5 billion in the previous quarter. The increase was driven by an equity investment of 285 million kroner. Interest-bearing receivables totaled 4.3 billion, slightly up from 4.2 billion in the previous quarter and include a 2 billion kroner loan and a 1.3 billion kroner convertible loan to Aker Horizons. Other equity investments ended the quarter at 1.6 billion, while non-interest-bearing assets amounted to 0.7 billion. Then let's move to the fourth quarter financial highlights for Acre ASA and holding companies. I will start with the balance sheet. As a reminder, in our accounts we use the lowest of historic cost and market values. At quarter end, the book value of our investments amounted to 28.1 billion kroner, an increase of 246 million during the quarter. This increase is primarily explained by the mentioned equity investment in Aker Property Group of 285 million, in addition to positive value adjustments for our investment in Solstad Offshore by 204 million. This increase was partly offset by negative value adjustments in Aker Horizons of 146 million. The book value of our equity was 25 billion kronor at quarter end, up 314 million. explained by profit before tax of 4.9 billion in the quarter offset by dividends paid in the quarter of 2.6 billion and the ordinary dividend allocation for 2024 of 2 billion kroner the fair value adjusted assets or gross asset value totaled 65.4 billion Subtracting for debt and dividend allocation the net asset value was 56.2 billion at the end of the quarter. This equaled 756 kr per share and value adjusted equity ratio was 86% after allocation for dividend. Aker had liabilities of 9.2 billion kroner at the end of the quarter, of which bond debt and bank loans totaled 7 billion. The liabilities at year end also included the 2 billion kroner dividend allocation for 2024, representing 26.5 kroner per share. As Eivind mentioned, the Board of Directors is proposing that the Annual General Meeting authorizes the Board to pay a potential additional cash dividend during 2025, based on the 2024 annual accounts, in line with the practice from last year. Akers financial position remains robust with a total liquidity buffer of 8.4 billion kroner, including undrawn credit facilities and liquid funds. The net interest bearing debt was 2 billion at the end of the quarter, down from 4.1 billion in the previous quarter. Our loan-to-value was 10% and about 70% of our gross asset value is in listed assets and cash. In terms of our debt maturity profile, the weighted average debt maturity was 3.6 years at the end of the quarter. During the quarter we have repaid the Acre 15 bond amounting to 1.4 billion kroner and repaid bank loans of in total 500 million kroner. Taking available credit lines and the extension options on the bank loans into consideration, the implicit maturity of our total loan portfolio would be more than five years. Then to the income statement. The operating expenses in the fourth quarter were 95 million kroner. During the quarter, Aker booked a total dividend income from Aker Solutions, Aker BP, Solstahl Maritime and AMSC of 5.1 billion. The net value change in the quarter was negative 27 million, mainly explained by a value decrease in Acre Horizons of 146 million, offset by a positive value increase in Solsta Offshore of 204 million. Our net other financial items were negative 12 million. This was mainly explained by net interest expenses of 72 million and negative value adjustments on the AMSC-TRS agreements of 23 million. And this was offset by net foreign exchange gains of 118 million in the quarter. And the profit before tax was then 4.9 billion in the quarter and 9.2 billion kroner for the year. Thank you, that was the end of today's presentation and we can then move on to Q&A.

speaker
Christina Chardom
Head of Communications

Okay, let's take the first question. Eivind, you mentioned Ocker Horizons and the ongoing process to optimize the company's capital structure. Can you say a bit more about this process and Ocker's view on repayment of debt?

speaker
Eivind Eriksson
President and CEO

Well, first and most importantly, Aqua Carbon Capture announced earlier this week distribution of 2.5 billion Norwegian kroner in cash dividend to Aqua Horizons and other ACC shareholders. In addition to that, Aqua Horizons continues to develop its portfolio assets and businesses, ultimately with a goal to partly monetize and free up capital. And last but not least, the refinancing of existing debt, both external debt as well as the shareholder loan, will be a task which will be solved during the course of this year. Great.

speaker
Christina Chardom
Head of Communications

Next question is, Cognite moved its headquarters to the US and you spend time on the AI momentum in your letter. What is the latest on preparing for the IPO and will a sale to an industrial partner be more likely?

speaker
Eivind Eriksson
President and CEO

Well, the best way to create optionality including positioning the company for a possible IPO is to build a great company which is attractive to third parties. We have no specific timeline for an IPO, but we appreciate the fact that Cognite continues to grow. Impressive increase in annual recurring revenue last year, entering into other industry segments than energy, manufacturing in particular. and moving the center of gravity, including the headquarter, to the United States, all in line with the initial strategy and plan. If Cognite continues on the track they have embarked on, I'm pretty sure that opportunities will come.

speaker
Christina Chardom
Head of Communications

Great. The next question is, what do you see as the main value triggers in Acre going forward?

speaker
Eivind Eriksson
President and CEO

Oh, that's a big question, but AccuBP is not only our biggest investment, but also a company which continues to grow. AccuBP announced the long-term production profile early this week, which will increase from now up to the end of this decade. For Aker and other shareholders, that means not only increased production, but also increased cash flow subject to oil price. And the increased cash flow will again support an increased dividend in line with Aker BP dividend policy. So, ARKBP is a very important asset and an expected value-driven driver in the ARK portfolio longer term. But in addition, we have a wide range of investments in a number of different industry segments. The software portfolio is another exciting value trigger in the portfolio. We have already talked about Cognite, but another investment in the software portfolio which is somewhat under-communicated is ACE. It's a younger company, less mature, but with a product which has a significant market potential, so medium to long term. ACE could surprise the market by rapid growth and contribute also positively to our value creation. It's worth noticing that the value of ACE in our net asset value today is, if memory serves me correctly, around 35 or 37 million Norwegian kroner. And it's fair to assume that already today the real value is significantly higher. And then we have a more focused strategy and we will prioritize investments which will generate cash flow. Part of the new and more focused strategy is to do more in real estate. The ultimate goal is to build up a real estate yield company, more in line with what we have done in the past in the shipping segment, when we had Ocean Yield as a significant portfolio company with a more predictable dividend, an absolute dividend to occur. And going forward, the goal is to create something similar with Archi Property Group as the vehicle.

speaker
Christina Chardom
Head of Communications

Great. And on the topic of upstream cash, there's a question. You had an impressive dividend flow talker in 2024 with more than 11 billion Norwegian kronor, including some extraordinary. Can you please indicate how you see this upstream cash situation for the next year?

speaker
Eivind Eriksson
President and CEO

It has been part of our strategy for quite a while to increase year-on-year the upstream cash flow to ARKU. It's partly about the dividend policy applied by each individual portfolio of your company. It's also partly about extraordinary dividends triggered by monetization or value-accretive transactions. 2024 was a fantastic year, but 2025 will also be a year in line with the said strategy. based on what the portfolio companies have already announced. Akkur will receive, if memory serves me correctly, 5.5 billion kronor in upstream dividend. For those of you who follow the Artica portfolio, you will notice that we have also announced transactions which could lead to extraordinary dividends, as transactions did in 2024. Absent dividend to Accu continues to grow and the base dividend will be based on dividend policies from each and every portfolio company.

speaker
Christina Chardom
Head of Communications

Great. Over to Auker's dividend policy. You communicated a dividend policy of 4% to 6% of the net asset value. Today's announcement indicates a level above that range. What is the reasoning behind this decision and will Auker's dividend policy be updated again?

speaker
Eivind Eriksson
President and CEO

Well, we updated a few months ago the dividend policy, and the current dividend policy is to pay between 4% and 6% of net asset value in cash dividend to our shareholders annually. The dividend policy will not be changed. The dividend policy is what our shareholders should expect as a guidance from the company. However, Acura is also opportunistic. Our board has the freedom to decide on a different dividend based on relevant criteria. This time, the discussion was about the financial strength, which is great, the upstream cash flow last year and expected this year, and last but not least, the investment capacity we need in order not only to support existing portfolio companies, but also pursue new investment opportunities. This time, we decided to propose a dividend beyond the current dividend policy. And I will not rule that out in the future. But the guidance to the market is 46% of NAV.

speaker
Christina Chardom
Head of Communications

Great. And then last question that I've received is Acre Carbon Capture. What is the reasoning for the dividend payment to come so long after the transaction closed?

speaker
Eivind Eriksson
President and CEO

Well, first and foremost, Acre, as well as our fellow shareholders, should appreciate the fact that we have created a lot of value. from an ARCA carbon capture. The point of departure was ARCA carbon capture operating as a part of ARCA Solutions. I think it's fair to say that the implicit valuation of HSE as a part of ARCA Solutions was close to zero. Hence, we decided in 2020 to spin off the carbon capture business and establish ARCA carbon capture. We did that at a valuation of 1.7 Norwegian kroner per share. This week, ACC announced a cash dividend in the total amount of 5.8 Norwegian kroner per share, enabled by the transaction we did with SLB. In addition to that, Akakabo Capture will keep cash to support its ownership in SLB Capture, And the value per share of that cash amount is 1.7. So if you sum that up, it's a significant value creation to shareholders, which is very much in line with how Acure typically creates shareholder value. in a combination of organic growth and transactions. You can argue that it took a while before we clarified to the market how to manage the proceeds from the SLB transactions. It has been a somewhat complex discussion in the ACC management and the ACC board, partly about what it will take to support the 20% shielding in SLB Kapturi, partly about alternative investment opportunities, and partly about dividend. But today, we know the answer, and it's a great value creation for ARK Horizons and other ACC shareholders.

speaker
Christina Chardom
Head of Communications

Great. No further questions, so thank you, Even and Sven-Oska. That concludes today's quarterly presentation. Thank you for watching.

Disclaimer

This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.

-

-