Aker Solutions Hldg Asa

Good morning and welcome to Aake Solutions presentation of our third quarter results. My name is Preben Ørbæk and I'm the head of investor relations. As usual, I'm joined by our CEO Kjetil Digre and our CFO Idar Eikrem, who 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. As always, let me start the presentation with the main messages for today. First and foremost, I'm pleased to report that we continue to deliver solid financial results in a period of high activity. Our third quarter revenues were 17 billion kroner, which is an increase of almost 30% from the same period last year. And we delivered an EBITDA margin of 8.8% in the quarter, or 7.2% if we exclude net income from SLB 1 sub-sig. In Aker Solutions, our core focus is to deliver predictable project execution. And during the quarter, I'm pleased to report that we met all key milestones on the Aker BP portfolio and celebrated the official opening of the record-breaking Ormen Lange Phase 3 project at Nyhavna. And speaking of high activity, based on our secured backlog, we now expect revenues for the full year of 2025 to exceed 60 billion. To put this into perspective, this represents more than three times our revenues in 2020 and 2021 when excluding the subsidy division. However, as we mentioned in our second quarter presentation, we expect activity levels to come down in 2026. Market conditions are changing, and we need to adapt. But fortunately, that is how we have always operated. First of all, we have a scalable business model that is designed to respond to cycles. We are also improving efficiency throughout our organization and in our projects, implementing new digital solutions and robotics to reduce cost and time to First Energy. I'll talk more about this later, but first I will take you through some of the operational highlights of the quarter. Let me start again with the Aker BP portfolio. I'm encouraged to report that the projects are progressing according to plan. As you saw from the introduction video, several important milestones were met during the third quarter. Let's start with three highlights from the Hugin A project. In July, we celebrated the sale away of the massive 22,000 ton jacket substructure from our yard in Vardalen. The jacket was later successfully installed at the Yggdrasil area in the North Sea. And at Eggersund, the utility model was successfully loaded out and transported to Stord for final assembly. And in late September, another critical milestone was met when this Wellbay module arrived at Stord from our partner yard in Dubai. Progress was also good on the Valhall PWP and the smaller Huginn B and Fenris projects in the period. In addition, our lifecycle segment is actively engaged in modifying existing infrastructure on the Valhall Central Complex and on the Skarv FPSO. Across the Aker BP portfolio, I continue to be impressed by how teams across Aker Solutions and the Alliance partners are working together to deliver these complex projects. Some projects are also leaving our yards to start the offshore installation and commissioning phases. One example is the Jackdaw project, where the topside was successfully loaded out from Vardal and installed offshore in the UK. This is a so-called not permanently attended installation, enabling lower manning and cost-efficient production from the gas reservoir. Moving over to Ormelange. In August, we celebrated the official opening of the Ormen Lange Phase 3 project, together with SLB 1 Subsea, Subsea 7 and Shell. Aker Solutions has been responsible for the integration of the Subsea compression system with the Nyhavna onshore gas plant. This includes the delivery of a 500 ton module providing power, cooling, heating and ventilation for the offshore project. SLB1 Subsea has been responsible for the Subsea compression system, which enables increased recovery from the shell-operated or melange field. I think it's worth mentioning that the project has set a few records when it comes to Subsea work. One is for the deepest installation of a Subsea compression system in water depths of more than 900 meters. It also set a new record for the longest subsea step out, delivering gas to the Nyamna plant more than 120 kilometers away. We are also working together with SLB 1 Subsea and Subsea 7 on the Jans Subsea compression project for Chevron in the Western Australia. Akers Solutions is responsible for the delivery of about 30 modules to what will become part of the world's largest subsea compressor system, weighing approximately 6,500 tons. Deliveries of modules from our Eggersund yard started in early October this year, with the final transport to the field planned in the fall of 2026. Next, I wanted to highlight our progress on what we have called the second generation renewables projects. These are projects we have taken on with balanced risk-reward profiles and joint focus on standardization to drive down project costs. On Norfolk, we are progressing as planned on the two HVDC platforms executed in our joint venture with our partner DryDocsWorld, seeing significant benefits in copying effects from the first to the second topside. We have also started work on the jackets for these platforms, taking advantage of our state-of-the-art robotic production line at Verdal. Lastly, I wanted to touch upon our hydropower business. Personally, I'm very happy to see that hydropower, which is a growing market, is back as a key offering to our energy clients. I don't know of many companies that can brag about having 150 years experience in this market, but we do. From our state of the art facilities at Randi, featuring Europe's largest mill-turn machine, we are supporting hydropower's new role in the energy mix, providing flexible and reliable power when society needs it. One example is the Svean project for Statkraft, where Aker Solutions is delivering all electromechanical equipment. This delivery is key to modernizing the Svean plant with the target of providing 10% more electricity through higher efficiency using the same resources. All in all, I am pleased to see that we continue to deliver predictable project execution across our portfolio And I would like to recognize the contribution of our 12,000 employees, as well as the thousands of subcontractors and hired-ins who make this possible through their expertise, dedication and teamwork. Next, I will talk about our tender pipeline and market outlook. At the end of the third quarter, our active tender pipeline stood at about 75 billion. This was a slight reduction from the second quarter, mainly driven by the announced cancellation of Equinor's electrification projects in Norway. In the current environment, the market conditions are getting tougher, especially for new investments within renewables and transitional energy solutions. A key part of our response is to work closely with both developers and our delivery partners to mature commercially viable projects. This relates both to the adoption of new tools and technologies such as AI and robotics, but also how we work together to come up with innovative concepts and designs that enhance efficiency, reduce costs, and reduce delivery times. This joint improvement agenda is also highly relevant within oil and gas, where we are currently in the process of renegotiating several important long-term frame agreements for maintenance and modification services. And we're also working with clients to mature several greenfield oil and gas opportunities with the aim of turning them into future projects. So to summarize, the last five years have been a remarkable growth and transition journey for RAK Solutions. And I'm very proud of the fact that we continue to deliver solid financial results with such a high workload across our locations. This is a true testament to the capabilities of our 12,000 employees and the culture that we have developed together. At the same time, we recognize that the market is changing around us and that our activity levels will go down in 2026. That said, adapting to change is not something new in ARCA Solutions' 180-year history. As mentioned, we have a scalable business model enabling us to ramp up and down activity. Furthermore, we are working closely with our clients to mature new opportunities, both in traditional oil and gas and within renewables and transitional energy solutions. And finally, our financial position remains robust. This gives us a strong foundation to continue developing the company and generate solid returns for our shareholders over time. And now I will pass the word to Ida, who will go over the numbers in more detail.

Thank you, Chet El. I will now take you through the key financial highlights for the third quarter, our segment performance, and run through our financial guidance. As always, all numbers mentioned are in Norwegian kronor, unless otherwise stated. So let me start with the income statement. The third quarter revenue was 17 billion, up 29% from the same period last year. The underlying EBITDA was 1.5 billion with a margin of 8.8%. If we exclude the net income from one subsea, our underlying margin was 7.2% in line with our guidance for the full year. The underlying EBIT was 1.1 billion with a margin of 6.6%. and the underlying net income was 863 million, representing earnings per share of 1.79 kroner in the quarter. Now let us take a look at the cash flow. Our financial position remains robust with our net cash position that increased to 2.5 billion in the quarter. Operational cash flow in the period was around 400 million. This was mainly driven by EBITDA contribution from our operating segments, as well as reversal of working capital of about 550 million. CapEx in the period was 94 million, representing about 0.6% of revenues in the quarter. And lastly, the quarterly dividends received from our 20% stake in SLB 1 subsea was 142 million. Now let's take a closer look at our segments. For renewables and field development, the third quarter revenue increased to 12.5 billion, representing a year-on-year growth of 36%. The underlying EBITDA in the quarter was around 1 billion with a margin of 8%. The legacy lump sum project continued to be a drag on the margins in the period. However, I would also like to mention that margins on the second generation renewable projects are healthy. The order intake in the period was $7.1 billion, leading to a secured backlog of $41 billion at the end of the quarter. Based on the secured revenues and backlog, we now expect the revenues in this segment to be around $45 billion for the full year of 2025, representing a growth of about 20% from 2024. For the lifecycle segment, the third quarter revenue came in at 3.8 billion. This is a 10% increase from the same period last year. The underlying EBITDA was 275 million with a margin of 7.2%. Order intake was 2.6 billion or 0.7 times book to bill. The backlog was 19.1 billion, dominated by long-term frame agreements and reimbursable modification projects with long-term customers. Based on the secured backlog and market activity, we expect revenue in lifecycle to be around 15 billion for the full year of 2025, representing a growth of about 15% from 2024. Moving to our financial performance of the SLB 1 subsea, here shown as 100% basis translated into Norwegian kronus. You will also see that we have added some more detailed financial information about SLB 1 subsea in the appendix to this presentation. In the third quarter, 1 subsea reported revenues of 9.9 billion, For the first three quarters of 2025, revenues for the company were about 30 billion. The EBITDA in the quarter was about 1.8 billion, with a margin of 18.4%. The margin in this quarter was negatively affected by change in revenue mix and one-off cost on a legacy project. Underlying execution, however, remains strong. So far in 2025, the company has delivered an EBITDA margin of 20%. Net income for the entity was around 1.1 billion before PPIA adjustments. After these adjustments, Arca Solutions recognized 295 million for our 20% share. I should mention that these figures include a 95 million kroner catch-up effect from our second quarter reporting, as actual performance was better than forecasted. In the first three quarters of 2025, Arca Solutions has recognized about 670 million in net income from one subsea into our financial figures. The backlog for the company was 47.3 billion at the end of the quarter. Order intake in the period was about 11.5 billion or 1.2 times book to bill. This includes the award of a 12-well all-electric subsea production system for the Fram Sør field for Equinor. The company expects order intake to increase towards the latter part of the year, positioning the company for growth in 2027 and onwards. As you can see, SLB 1 Subsea is an important contributor to Arca Solutions' financial performance and value creation. Since the closing of the merger, SLB 1 Subsea has built up a solid net cash position of about $440 million. The company has an attractive dividend policy with a target to distribute about $280 million to its shareholders in 2025. For Arco Solutions, this represents a dividend at current exchange rate of between 550 and 600 million NOK this year. Now to sum up. In the third quarter, we continue to deliver solid financial and operational performance. As we have said before, the legacy Lamsub projects have been both operational and commercially challenging. Commercial discussions are still ongoing with both clients and subcontractors to solve these commercial challenges. Based on our secured backlog and market activity, 2025 revenues is now expected to exceed 60 billion with an EBITDA margin in the range of 7 to 7.5%. As mentioned at this early stage, we expect activity levels to come down in 2026 with revenue forecasted to be around 45 billion. SLB 1 Subsea is an important contributor to the financial performance of Arcus Solutions. The company has built up a solid net cash position and is on track to distribute about $280 million to its shareholders in 2025. At current exchange rate, this implies a dividend to Akers Solutions of about 550 to 600 million Norwegian kroner this year. CapEx for 2025 is estimated to be around 1% of revenue. And lastly, working capital is expected to normalize to between negative four and negative six billion over time. That was the end of our presentation, so thank you for listening. In a few moments, we will open up for questions.

Okay, the first question comes from Erik Fosso in Sparebank EnMarkets. Can you talk about the disappointing AR7 budget and how it affects your business, particularly looking at the Vanguard East and the Vanguard West projects?

First of all, comment on the UK. If you look at the regions where we are involved and energy transition efforts and renewables, one of the places that are really both predictable and forward-leaning with ambitions is UK. So that's one comment. I think this will develop and offshore wind is going to be a key to UK going forward. And then to this specific question, you know, we have our relation with our client RWE and in those projects that are mentioned, the Norfolk, Vanguarde, East and West, we have milestones to reach and the projects are progressing very well as seen in the video here. puzzling to get together in a predictable way. And we will just continue to deliver that in good sort of coordinated fashion together with our client. So no big, big issues there. And we are pushing on. On the one subsea.

And there's a follow up from Erik Fossow, if you can give some indication on what to expect in SLB 1 Subsea in 2026?

To start off just with the 1 Subsea part of it, we are closely coordinated obviously through our ownership there. What we see in different regions, for instance in the NCS, is that the Subsea is a solid and healthy brick in the puzzle for energy projects. For instance, the Norwegian continental shelf is going into an area where you know, lifetime extensions, you know, subsea tiebacks and also bigger greenfield subsea projects and also more complex technology elements like the compression projects that is going to be stable slash increase. And so that's what we see in our one subsea sphere.

Yeah, just to add to this, you will also see in this quarter that we have provided some additional information of the historical performance of one subsistence establishment. So that should help you. And with the combination of market information, you should be able to sort of make some assessment of what the 2026 could bring.

Moving on to a question from Lucas Dowell in Arctic. What are the main factors that can impact your preliminary 2026 guidance?

Yeah, our preliminary guidance for 2026, as you can see, we have came out with the top line guidance and that we have put 45 billion kroner in top line which is a reduction from current level of 60 plus and that was expected due to the high activity level that we are currently doing.

Moving on then to a few questions from Niall Cliven in ABG. I can start with the first. The Aake BP has increased the capex guidance on the key development projects. How does this affect Aake Solutions as an alliance partner?

Well, first of all, I guess, you know, information about projects and the status in them is something that you really get from AcreBP. Our part of it is that we are engaged as an alliance partner in, you know, big projects, many of them, you know, in different parts of the The asset setup of Aker BP and the projects are on track, both when it comes to progress, when it comes to quality, safety, and also the main prognosis of reaching the startups as planned. CAPEX is then always a combination of potential new scope, which we know is part of some of these projects, and then also how we along the way are taking actions to make sure that we are delivering within Acre BP's sort of frames and budgets. And as an alliance partner, you know, we are in a peak activity and many of us, including myself, are spending a large and a major portion of our time actually to safeguard these projects in a good sort of collaborative way in these alliances.

Next question from Newell. When do you expect the conclusion of the multi-year lifecycle frame agreements that are currently on tender?

Yeah, I would say it's quite a special timing now because many of them, almost all of them, has been up for renewal. And I think this firstly, what is really a great opportunity is that all our clients on these contracts are inviting for a common improvement push. And that's what we are right in the middle of now. And then these things will then, it's back to the client's sort of decisions to when they are ready, but it will be in the months to come that these things will be clarified both in Norway, but also in, for instance, Canada.

Anything to add, Idar? Yeah. The third question from Noel, did you make any loss provisions related to the legacy projects in the third quarter?

Yeah, that also covers another question that we have got on this provision line that you can see in the balance sheet. There is a reduction of 100 million roughly from second quarter to third quarter. In that provision line, you will have three elements. One is on those contracts, loss making contracts, which is going down in the provision. And then you have warranty provision on ongoing project. and those have increased during the quarter of natural reason of progress. And the last element that goes into that line is all other provisions that we have in addition to the two first ones.

Thank you. Next question from Jarle Haugnes. Whether it's sustainable with a capex of only 1% in Arc Solutions?

Perhaps I can start just on referring back to the activity package. That's what we are right in the middle of now to deliver on. When launched, pointing at all these oil and gas opportunities that we are now realizing, it came with an expectation and pointing at opportunities to both sort of modernizing the industry engaged in oil and gas, and then also gradually make sure that we are ready to take on tasks and responsibilities in the new energy verticals So that's what's been happening now for three to four years. We have been investing billions in our yards to upgrade, to be more efficient, to be safer, and we also invested in the competence of our people. All in all, this was necessary to be able to push through the activity level that we're actually engaged in just now. Historically, Ida, perhaps you can comment.

Yeah, it's correct what you're saying. And now we are in a phase where we actually are capitalizing on the investment that we have done over the last few years. We have enlarged our capacity quite significantly. And revenues for next year's forecasted to be 45 billion kroner and 1% is sort of the capex guidance for that year, due to the we can capitalize on the investment that we have done. Any sort of capex over and above that needs to be sort of separate business cases that would be good for us and shareholders to do, and then we will announce that separately as a special case.

excellent that seems to be uh there there seem to be no further question uh in um from from the audience so uh with that um thank you all for listening in um and from everyone here goodbye