Aker Solutions Hldg Asa

Good morning and welcome to Arc Solutions presentation of our third quarter results. My name is Preben Ørbæk and I am the Head of Investor Relations. With me today is our CEO Kjetil Ligre and our CFO Idar Eikrem. They will take you through the main developments of the quarter. After the presentation, 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 floor to Kjetil Digre.

Thank you, Preben, and welcome to everyone tuning in. Let me start our presentation with the main messages for today. First and foremost, I'm happy to see that we continue to deliver on our financial targets. The third quarter revenue was 13.2 billion, which is a 45% growth from the same period last year. Our EBITDA in the quarter was 1.2 billion, with a margin of 9.2%. The main driver behind the financial results is the solid operational performance across our project portfolio. And I would like to thank all our 11,700 colleagues for their valuable contribution. During the quarter, we have met several important milestones. Those include the successful anchoring of the Johan Casper FBSO in the Barents Sea and connecting the Troll West platforms to power from shore. For the Aker BP projects, we continue our solid progress in the Alliance, with high activity across locations both in Norway and abroad. And last but not least, we announced yesterday that the board will propose an extraordinary dividend of 21 kroner per share at an extraordinary general meeting to be held on the 22nd of November. The target is to pay out about 10 billion to our shareholders in early December this year. This comes on top of our ordinary dividend policy, where we have already paid out about 1.5 billion so far this year through dividends and share buybacks. It has been about four years since we merged Aker Solutions and Kværner, and I'm proud of the fact that we have delivered on our ambition and all the targets, and that we continue to serve our investors through an attractive capital allocation strategy. This is a clear testament of the culture and the capabilities of the entire Aker Solutions organization. Next, I will take you through some of the operational highlights of the quarter. And let me start with Equinor's Johan Casper, FBSO. Our engagement in the project started more than 10 years ago. Since then, more than 11,000 people have been involved in the project with important contributions from many Aker Solutions locations, such as Fornebu, Stord, Sandnesjøen, Egersund, Verdal, and Mumbai. With the floater securely anchored at site in the Barents Sea, we continue to support Equinor to ensure a safe startup of production this winter. I would also like to add that completing such a challenging project would not have been possible without the strong cooperation between Aker Solutions, our client Equinor, and our many large and small subcontractors and suppliers, both in Norway and abroad. Then moving on to the Aker BP portfolio. where construction activity is ramping up across our own and our partnering yards. Progress is according to plan, and several important milestones have been met in this quarter. This includes the delivery of pile clusters from Dubai, and the first roll-up of the 20,000 ton Huginn A jacket at our yard in Verdal. At Stord, the first two sections of the Huginn A utility module were recently lifted onto the grillage. This marks the start of assembly for the largest of the topsides in the portfolio, and in fact, the largest topside ever assembled at our yard at Stold. At this important phase, I'm very happy to see how the members of the Alliance are stepping up together as one team to deliver these important projects on the Norwegian continental shelf. So let's move over to lifecycle and our electrification portfolio. At Troll West, the final module was successfully installed offshore in early September. Together with our client Equinor, we flipped the switch and the Troll B and Troll C platforms are now supplied by electrical power through a subsea cable from Kolsnes outside Bergen. When the whole project is completed, it will decrease CO2 emissions from the field by almost half a million tonnes per year. This will contribute significantly to emission reduction targets in Norway. Another important modification project in Norway is the Årmelange phase 3, which we are executing for Shell. The project was awarded back in 2020, and our scope is to integrate the wet gas subsea compression system with the Nyhavna onshore gas plant. The subsea compression system, which is delivered by one subsea, will enable increased recovery from the shell operated Årmelange field. The gas from the field will be transported via underwater pipelines to the Nyhavna plant. At the heart of the Årmelange phase 3 project is a 500 ton module that has been fabricated at our yard in Eggersund. The module will provide both power, cooling and HVAC for the offshore project. I think it's also important to note that Aker Solutions has been present at Nyhavna for more than 20 years, and that this project is a clear testament to the close relationship between Shell, Aker Solutions and OneSubsy. Okay, let's continue with our international portfolio in lifecycle, where we are seeing high activity in Brunei, Angola, Canada and the UK. At the Hebron project in Canada, we recently completed both the heating stack replacement and produced water bypass projects for Exxon Mobil. Staying in Canada, we are working on two projects for Senovus, namely the West White Rose and the Sea Rose FPSO. Starting with the latter, the Sea Rose FPSO recently left a yard in Belfast where it has undergone modifications to extend its life on the White Rose field to 2038. As for the new West White Rose topside, it is currently located at the yard in Texas, and our team in Canada is preparing for the towout, hookup and commissioning phases of the project. Moving over to our operations in Brunei, where we recently completed the planned annual shutdown of several offshore assets. This is part of our long-term frame agreement with Brunei Shell Petroleum, In this contract, Aker Solutions is responsible for maintenance and modifications of more than 200 offshore assets in the region. Lastly, I wanted to touch upon our CCS portfolio. In September, a major milestone was met with the official opening of the Northern Light CO2 storage terminal in Øygarden on the west coast of Norway. The terminal is part of the Longship project, and it's the world's first cross-border CO2 transportation and storage facility. Aker Solutions is also engaged in the two other Longship projects. We're in the feed phase of Celsius carbon capture and storage plants in Oslo, and we are in the final stages of executing for Heidelberg Cements capture plant at Brevik, working with our partner SLB Kapturi. Together, these three projects open a complete value chain for the decarbonization of European industries. And we are proud to be part of this groundbreaking effort, using our three decades of experience within CCS to develop a new industry and to solve energy challenges for future generations. Now let's talk a bit about the investments that we make. To safeguard execution over a large project portfolio, we are implementing new technologies and digital solutions. One example is the fully robotic production line at Verdalten. Here, take a look. Quite exciting. So the fully robotic production line at Verdal was officially opened in September. For this project, we worked with Aker BP and local partners such as Gudtech, Sintef and NTNU. And together we have accelerated the development and implementation of robotics and automation at the yard. And these are not just robots that look good on video. We are already seeing the benefits in the numbers. For instance, the production line increases the speed of welding by up to seven times and surface treatment by a factor of 13 compared to traditional manual operations. We also see improvements in quality and safety, all leading to enhanced capacity and shorter delivery times. Investments like these are not only vital to safeguard the execution of the existing project portfolio, There are also key elements in our strategy to improve competitiveness for the future. This takes me to our tender pipeline, which has increased to about 82 billion at the end of third quarter. We continue to see good mix between traditional oil and gas projects, decarbonisation efforts, such as electrification, and opportunities within renewables. When it comes to oil and gas, we are actively engaged in maturing concepts for the next wave of offshore developments, particularly in the North Sea and other harsh environments where we have a solid track record. We're also in the process of renegotiating long term frame agreements on maintenance and modifications. Here we see a strong demand driven by ambitions to optimize production and new subsea fields extend lifetime and to decarbonize production. We are also seeing positive signs in renewables markets, despite some projects sliding to the right. One example is the Norfolk project, which did not obtain a CFD in the latest UK round, but where our engagement with the client continues to mature the development for the next licensing rounds coming up in 2025. For CCS and hydrogen, we are seeing increased interest in our capabilities outside Norway. We have recently won several early phase awards, such as the FEED study for Aukio's green ammonia plant in India and the feasibility study for Battelle's Atlantic Carbon Hub in the US. A key element in our strategy is to position earlier with key clients through our energy consultancy called Enter. And I'm very happy to report continued strong growth in this entity. So far this year, we have been engaged in more than 250 studies across market verticals and geographical regions. In doing so, we are both supporting our clients in bringing new projects to the market and positioning Acker Solutions for future opportunities. This takes me to the general outlook for Acker Solutions. Firstly, we have a solid order backlog of projects with balanced risk reward profiles. Our key focus is to continue delivering 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 that we expect to come to conclusion over the next six to 18 months. Lastly, we have a very solid financial position, enabling us to both develop the company and deliver attractive returns to our shareholders. And with that, I hand the word over to Idar, who will take you through the numbers in more detail. Thank you.

Thank you, Chet Edel. I will now take you through the key financial highlights of the quarter, a 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 third quarter revenue was $13.2 billion, up from $9.1 billion a year ago. This represents about 45% growth year on year. The underlying EBITDA in the quarter was $1.2 billion, up from $214 million a year ago, with a margin of 9.2%. Both lifecycle and renewables and field development have reported significant improvement in margin levels compared to the same period last year. In addition, net profit from our equity-accounted investees, mainly from our 20% ownership in one subsea, contributed with 245 million in the quarter. The underlying EBIT was 904 million, up from 59 million a year ago, with a margin of 6.9%. Net financial items were negatively affected by the developments in the SLB share price and associated exchange rates in the period. The net income excluding special items was 812 million, down from a billion a year ago. And lastly, earnings per share were 1.70 kroner down from 2.18 kroner a year ago. Moving over to our segment performance. For renewables and field development, the third quarter revenue increased to 9.2 billion, up from 5.6 billion in the same period last year, representing a year-on-year growth of about 65%. The underlying EBITDA in the quarter was 774 million up from 239 million a year ago and with a margin of 8.4%. This is the result of a strong execution across our portfolio, meeting critical milestones to deliver on time, quality and cost. However, the legacy renewable portfolio continues to be a drag on our margins. The secured backlog remains high at more than 40 billion. Based on the secured revenues and backlog, we expect the revenue in this segment to increase by more than 65% in 2024. For the life cycle segment, revenues in the third quarter was 3.5 billion, up from 3.2 billion in the same period last year. The underlying EBITDA was 244 million in the quarter, up from 163 million last year, representing a margin of 7.1%. This was enabled by continued solid performance on ongoing projects and long-term frame agreements. The order intake in the quarter was 2.7 billion representing a book to bill of about 0.8 times. The secured backlog at the end of the quarter was 23.2 billion providing a good visibility for future activity levels. based on the secured revenues and backlog we expect the life cycle segment to continue close to the 2023 levels also in 2024. in early october last year we celebrated the final close of the subsea transaction merging arca solutions subsea business with slb to create one subsea 12 months later we are happy to see that the company is getting off to a flying start. In the third quarter, the company reported revenues of 10.7 billion Norwegian kroner with an EBITDA margin of 18%. If we look at the last four quarters, the company has delivered revenues of more than 40 billion Norwegian kroner with an EBITDA margin just below 20%. Going forward, the company has announced annual synergy targets of around $100 million over time. Net income for the entity was about $1.1 billion before PP&A adjustments. After these adjustments, Arca Solutions recognized $244 million for our 20% share. These figures, however, included a 43 million catch-up effect from our second quarter reporting, as actual performance was better than forecasted. During the third quarter, the company has paid back in full all outstanding vendor note and the working capital loans to Akka Solutions. The company has a strong net cash position and has decided to pay out quarterly dividend of about $35 million to its shareholders in the fourth quarter of this year. For Arca Solutions, this means a dividend of approximately 75 million Norwegian kroner. As a long-term shareholder and strategic partner, we are very happy to see that the underlying performance of One Subsea and we continue and we expect the company to continue its positive development in the years to come. This brings me to the cash flows development in the quarter. Operational cash flow in the period was negative 519 million, mainly driven by working capital. of working capital reversal of about 1.2 billion. CapEx was 254 million in line with our guiding. During the quarter, we received the remaining cash proceeds from one subsidy of about 1.3 billion. Lastly, we saw a slight positive impact from exchange rate adjustments in the period. Moving to our financial position, As mentioned, the working capital started to normalize in the quarter, with a net outflow of 1.2 billion. Short term, we expect working capital to remain relatively stable, but over time normalize towards a range between negative 4 and negative 6 billion. CapEx in the period was, as mentioned, 254 million down from previous quarters as we finalized our safeguarding investment program. These investments, such as the Vardal production line, are critical for safeguarding the delivery of our backlog, but will also contribute to competitiveness going forward. Our financial position remains highly robust with a net cash position of 11.7 billion, including investment in liquid funds. This takes me to the capital allocation section of today's presentation. Since the merger between Arca Solutions and Kvanner in 2020, a key priority has been to build financial robustness while investing resources into profitable growth initiatives such as digitalization and robotization. With yesterday's announcement of an extraordinary dividend, we will return about 10 billion kroner to our shareholders in the fourth quarter. This comes on top of the ordinary dividend where we in the first half of the year distributed about 1.5 billion through dividends and share buybacks. Arca Solutions will maintain a healthy financial position also after the dividend payment enabling us to both develop the company and deliver attractive returns to shareholders over time. We set off a journey in the summer of 2020, setting ambitious targets for growth, margin expansion, and cash generation. Four years into this plan, I'm very happy to see that we have exceeded our financial targets. So to sum up, in the third quarter, we continue to deliver strong financial and operational performance. Based on our secured backlog, and market activity, 2024 revenues is expected to grow by more than 40% compared to 2023. The EBITDA margin is expected to be around 7.5% for the full year of 2024. In addition, 1 sub C will contribute to our financial performance through our 20% ownership. As mentioned, working capital is expected to remain relatively stable short term, but normalize over time to a level of between negative 4 and 6 billion. The capex in the full year of 2024 will be around 1.5 billion. Over time, we expect capex to be around 1.5% of revenues. And last but not least, with the announcement of the extraordinary dividend, Arca Solutions will have distributed more than 11.5 billion kroners to its shareholders in 2024. Thank you for listening. That was the end of the presentation. In a few moments, we will open up for questions.