Aker Solutions Hldg Asa

Hello everyone and welcome to Oxlutions presentation of our first quarter results. My name is Preben Ørbøk and I am the head of investor relations. Today our CEO Kjetil Digre and our CFO Idar Eikrem will give you an update of the main highlights of the quarter. Afterwards we have time for questions. If you are on the audio cast you can ask your questions using the online platform. So with that over to you Kjetil for the presentation.

Thank you very much, Preben, and a warm welcome to those of you who are following us online. We appreciate you dialing in. Let me start on the business update and the key highlights of the quarter. First of all, we keep up our positive development with increased revenues and improved profitability. Our first quarter revenue, excluding special items, was 11.5 billion kroner, which is a 61% increase from the same quarter last year. Our underlying EBITDA was 987 million, with a margin of 8.6%. Our order intake was 7 billion, and our backlog ended at about 69 billion. More than half of our current backlog are projects under the Aker BP Alliance, with balanced risk-reward profiles and upside potential through shared incentives. In April, the Annual General Meeting approved the dividends for the fiscal year of 2023, as well as extended the mandate for the announced buyback program. In 2024, the total shareholder distribution will be around 1.5 billion, or 60% of the adjusted net income, in line with our dividend policy. Second, we are progressing well on our project portfolio, with high activity across our locations. I am proud to see that Akersolutions is engaged in some of the most interesting energy projects around, focused on solving energy challenges for future generations. This leads to a continued positive outlook for Akersolutions. Our large order backlog gives a clear view of future activity levels. Our services are in high demand, and we have a strong pipeline of tender opportunities across our market segments. This applies to both oil and gas and renewables markets, and we continue to be very selective about which projects we take on. So a key message today is that we are in a good place as a company, which Ida and I will elaborate on in the following slides. Next, let me briefly take you through some of our operational highlights this quarter. As mentioned, we are progressing well on our project portfolio. For the Aker BP projects, activity levels at the yards are picking up. The projects are at the forefront of using new technologies within digitalization and robotization. For example, in Verdal, our fully robotic production line has completed the first sections of the Huginn substructure, which forms part of the Yggdrasil development. The production line is one of the investments we are doing to safeguard the delivery of these projects, improving efficiency, quality and safety in execution. On Equinor's Johan Casper project, activity levels at Stord remain high, preparing the FBSO for sea trials. We are also working on three other FPSO projects at the moment, namely Rosebank for Altera and Equinor, the Skarv upgrade for Aker BP, and life extension of the SeaRose FPSO for Senovus. SeaRose started operating in Newfoundland, Canada almost two decades ago. Currently, the platform is docked at the Harland & Wolff shipyard in Belfast, undergoing modifications to extend its life on the White Rose field to 2038. For this project, Aker Solutions is responsible for providing engineering and maintenance services as part of the long-term frame agreement with Senovus. Johan Sverdrup has been an important project for Aker Solutions and the wider Aker family for more than a decade. From 2012 and onwards, Aker Solutions has played a key role in the design and execution of this development. In the first quarter this year, we completed the hookup and commissioning of phase two of the project, and our involvement continues in the operations phase with our contract for maintenance and modification services to Equinor. In offshore wind, we are working on several HVDC projects for customers in the UK and North America. For the Norfolk Vanguard West project, fabrication has started at our partner yard in Dubai. This is the first of potentially three units for the development, creating opportunities for standardization and industrialization. Finally, I also want to mention our achievements in the CCS portfolio. Together with Aker Carbon Capture, we continued our deliveries towards Heidelberg Materials' Breivik project. This is the cement industry's first full-scale CO2 capture plant, and will capture about 400,000 tons of CO2 yearly. During first quarter, we delivered several key modules and the desorber, and completed a second heavy lift campaign at the Breivik site. The CCS plant forms part of the Norwegian government's longship program, which aims to demonstrate the capture, transport, and safe storage of CO2 from industrial sources. Let us now look at the order intake in the period. In the renewables and field development segment, we booked an order intake of 4 billion in the first quarter. This mainly came from growth in existing projects, but also high activity in our energy consultancy business. In the lifecycle segment, we recorded about 2.6 billion in order intake. This was also mainly from growth in existing contracts and call-offs in frame agreements. In the first quarter, we have won several important feed contracts and consulting service projects. This proves that our competencies and capabilities are relevant in emerging industries. Particularly in our energy consultancy, we are facing high demand for our services. In the first quarter of 2024, we have worked on more than 170 projects compared to around 300 projects for the entire year of 2023, and about 150 projects in all of 2022. This is the result of a focused growth strategy where customers appreciate our broad energy capabilities, our project experience, and our holistic understanding of the value chains across several market verticals. Industrial decarbonization is a main concern for both policymakers and asset owners globally, and we have a key role to play. Arca Solutions is currently engaged in several studies to help design and integrate various technologies to reduce carbon footprint within power generation and refineries. We are also experiencing high demand for our specialist offshore design and marine engineering capabilities. One example is the 1 gigawatt Havori floating offshore wind project, currently under development by Copenhagen Infrastructure Partners. Together with floating foundation specialist Principal Power and our own marine engineering and execution provider, Windstaller, we are supporting the client in achieving this innovative floating wind development in South Korea. At the end of the quarter, our tender pipeline was about 58 billion. Norway and Europe are still our biggest markets with around 70% of the pipeline. We see a good mix between traditional oil and gas developments, decarbonisation projects and renewables opportunities in the pipeline. We remain highly selective on which projects to target. We only focus on projects with the right risk-reward balance, and therefore we target customers and strategic partners who see the value of working closely together over time with aligned incentives. We work in geographical regions we know well and where we have established relationships with local stakeholders. And lastly, we are focused on identifying scopes of work where we can contribute with the full breadth of our capabilities. This takes me to the general outlook for Aker Solutions. I am pleased that we keep meeting our financial targets while positioning the company for profitable growth. We have a large order backlog, mostly from projects with Aker BP under the proven alliance model. Together with our partners, we focus on delivering predictable project execution in balanced risk-reward models that have shared incentives. We are active in tendering across segments, which allows us to choose carefully the opportunities we pursue. Finally, our financial situation is robust, and this gives us a strong foundation to grow the company and generate stable and solid returns for our shareholders. And now I will pass the word to Idar, who will go over the numbers in more detail. Thank you.

Thank you, Kjetil. I will now take you through the key financial highlights of the first quarter, 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 first quarter revenue was 11.5 billion, up from 7.1 billion a year ago. This represents about 60% growth year on year. The underlying EBITDA was 987 million, up from 247 million a year ago. The EBITDA margin was 8.6%. This was driven by good progress on our project portfolio, as well as oil and gas projects reaching profit recognition milestones in the quarter. In addition, our share in one subsea contributed with 195 million in the quarter. The underlying EBIT was $723 million, up from $98 million a year ago. Net income, excluding special items, increased to $690 million from $452 million a year ago, positively impacted by the increase in SLB share price during the quarter. Earnings per share was 1.40 kronor, up from 0.92 kronor a year ago. In April, we paid out dividend of 2 kronor per share. In addition, we have continued with our share buyback program, having acquired about one third of the announced volume at the end of the first quarter. Let us now look at our financial position. We start with our working capital, which at the end of the quarter stood at minus 8.8 billion. As stated before, we expect working capital to normalize as we execute on the large order backlog, which is forecasted as a cash outflow of around 4 billion in 2024. CapEx in the first quarter was around 600 million. This mainly relates to the planned investment to safeguard execution of the large oil and gas projects. We continue to have a solid net cash position of about 9.4 billion. This includes about 6 billion kroner of financial investments in liquid funds, which is not treated as cash under IFRS. Let us now look deeper into our cash flow development in the quarter. Operational cash flow in the period was 1 billion, mainly driven by the EBITDA in the quarter. CapEx was, as mentioned, 583 million, in line with our guiding. During the quarter, we made financial investment in liquid funds of another 3 billion kroner. Financial payments was negative 373 million kronor. This includes 152 million in acquisition of treasury shares related to our buyback program. Lastly, we have also had a positive exchange effect of about 153 million during the quarter. Now over to our segments. For renewables and field development, the first quarter revenue increased to 8 billion, up from 4.1 billion last year. The underlying EBITDA in the quarter was 617 million, up from 171 million a year ago, with a margin of 7.7%. This was positively impacted by projects reaching profit recognition milestones in the quarter. However, underlying margins are still negatively affected by projects yet to reach profit recognition and legacy renewable projects. The order intake in the quarter was 4 billion or 0.5 times book to bill. This was mainly driven by growth in scopes on assisting projects. The secured backlog remains high at 47.5 billion. Based on the secured backlog and market activity, we now expect the revenue in this segment to increase by about 50% in 2024 from 2023 levels. For the lifecycle segment, the first quarter revenue was 3 billion, which is slightly above the same period last year. The underlying EBITDA in the quarter was 195 million, up from 161 million a year ago, and with a margin of 6.4%. Order intake in the period was 2.6 billion, or 0.9 times book-to-bill. The backlog remains solid at 20.3 billion, dominated by long-term frame agreements and reimbursable modification projects with long-term customers. We expect the lifecycle segment to continue at close to 2023 levels also in 2024. The one subsea entity reported revenues of NOK 9.8 billion with an EBITDA margin of around 18% in the first quarter. Net income for the entity was about NOK 1 billion before PPA adjustments. After these adjustments, Arcus Solutions recognized 195 million as our 20% share in the net income from the entity. One subsea has a solid backlog of about 47 billion Norwegian kroner at the end of the quarter. Now over to order intake and backlog. Our backlog remains high at almost 70 billion, providing good visibility on future activity levels. More than half relates to the project to be executed in the well-proven alliance model with ArkeBP. This is a very good position to be in, and as Kjetil mentioned, our focus is to continue delivering predictable and solid execution to harvest upside potential and incentives. Now to sum up. In the first quarter, we continue to deliver strong financial and operational performance. Based on a secure backlog and market activity, 2024 revenues is now expected to grow about 30% in 2024 compared to 2023. EBITDA margins are expected to be between 6% and 7% in 2024. In addition, one subsea will contribute to our financial performance through our 20% ownership. The CAPEX for 2024 is estimated to be between 2.5% and 3% of revenues as we execute on our ongoing investment program to safeguard the large oil and gas projects in Norway, enabling us to utilize new technologies and digital solutions to enhance efficiency, quality, and safety. Over time, CAPEX is expected to be around 1.5% of revenues, Working capital is expected to normalize in 2024, with a forecasted negative cash impact of about 4 billion during the year. And the outlook for the company and for our industry is very positive, and Arket's solution is in an excellent position to take advantage of the opportunities ahead. Thank you for listening. That was the end of our presentation. We will now open up for questions.