Fourth quarter and preliminary annual results 2012

Transcription

1 Fourth quarter and preliminary annual results 13 February 2013 Photo: A/S Norske Shell

2 KVÆRNER ASA FOURTH QUARTER AND PRELIMINARY ANNUAL RESULTS FOURTH QUARTER HIGHLIGHTS Awarded contract for Gas-Fired Power Plant in Delaware of USD million Eldfisk 2/7 S hook-up and commissioning assistance option of NOK 400 million secured Strong order backlog securing 2013 revenues Access to capital totalling NOK 3.6 billion Dividend of NOK 0.53 per share paid 24 October HIGHLIGHTS Order backlog doubled from NOK 10.0 to 21.3 billion New predictable dividend policy implemented Major projects delivered SUBSEQUENT EVENTS Nyhamna onshore framework agreement adjusted to NOK 11 billion in total Proposal from the Board to pay a cash dividend of NOK 0.55 per share in April 2013 All home market tenders concluded with award to competitors Focus on project execution and improving competitiveness FINANCIAL HIGHLIGHTS Operating revenue EBITDA Order backlog NOK million NOK million NOK million ¹ Q4 11 Q1 12 Q2 12 Q3 12 Q4 12 Q4 11 Q1 12 Q2 12 Q3 12 Q4 12 Q4 11 Q1 12 Q2 12 Q3 12 Q Including a net positive effect of NOK 42 million from divestment of EPC Center Houston operations Kværner ASA 1 4th quarter report

3 FINANCIAL KEY FIGURES Amounts in NOK million Q4 Q4 ¹ EBITDA definition: Earnings before Interest (net financial items), Taxes, Depreciation and Amortisation. Total revenue and other income EBITDA 1) EBITDA margin 4.1 % 8.3 % 4.4 % 8.1 % EBIT Net profit Basic and diluted earnings per share (NOK) Order intake Order backlog Net current operating assets (514) (1 235) (514) (1 235) Net interest bearing deposits and loans FINANCIAL REVIEW Income statement Operating revenues in the fourth quarter amounted to NOK million, compared with NOK million for fourth quarter. Kvaerner reported operating revenues of NOK million for the full year, compared with NOK million for full year. The reduction from last year is mainly due to significant decrease in operating revenue from the International business area and the Downstream & Industrials segment. Earnings before Interest, Taxes, Depreciation and Amortisation (EBITDA) for the fourth quarter were NOK 119 million, compared with NOK 249 million in the same period last year. The EBITDA margin for the fourth quarter was 4.1 percent, down from 8.3 percent in the corresponding period in. The decrease in EBITDA is reflecting phasing of projects. EBITDA for the full year was NOK 473 million, compared with NOK million last year. EBITDA includes a net NOK 42 million positive effect from divestment of EPC Center Houston operations. Net financial expense for the fourth quarter was NOK 17 million, comprising net interest expense of NOK 10 million, foreign exchange loss of NOK 6 million and other financial expenses of NOK 1 million. Net financial expense for the same period in was NOK 106 million, which included one-off foreign exchange losses of NOK 107 million from prior periods. Net financial expense for the full year was NOK 31 million compared to NOK 109 million in. Net result from associated companies and jointly controlled entities was negative NOK 6 million in the fourth quarter and negative NOK 7 million for the full year. This is at same level as in equivalent periods in. Profit before tax for the fourth quarter was NOK 77 million compared to NOK 119 million for the same period last year. For the full year, profit before tax was NOK 369 million compared with NOK 903 million for the full year. The total income tax expense in fourth quarter was NOK 21 million compared to NOK 38 million for the same quarter previous year. The full year tax expense was NOK 131 million, compared to NOK 344 million for full year. The tax expense reflects an effective tax rate of 35 percent in compared to 38 percent in. The net profit in the fourth quarter was NOK 56 million compared to NOK 81 million in the corresponding quarter last year. The basic and diluted earnings per share for the fourth quarter were NOK 0.21 compared to NOK 0.30 in the fourth quarter. Net profit for the full year was NOK 238 million compared to NOK 559 million last year. The basic and diluted earnings per share for the full year were NOK 0.89, down from NOK 2.08 for full year Kværner ASA 2 4th quarter report

4 Cash flow Net cash outflow from operating activities was NOK 293 million in the fourth quarter, compared to cash inflow of NOK 322 million in the same period last year. The net current operating assets (NCOA) at the end of fourth quarter was negative NOK 514 million compared to negative NOK 840 million at 30 September. Customer pre-payments² were NOK 143 million at the end of fourth quarter compared to NOK 242 million at the end of the third quarter. The increase in NCOA in fourth quarter is mainly due to phasing of the projects in the Upstream segment. Net cash outflow from operating activities for the full year, was NOK 748 million, compared to cash inflow of NOK million last year. Net cash outflow from investing activities in fourth quarter was NOK 23 million and for the full year NOK 91 million with corresponding numbers for of NOK 77 and 231 million respectively. Capital expenditure in the quarter and full year amounted to NOK 43 million and 218 million. Capital expenditure in the quarter and year is mainly related to facility upgrades at the Kvaerner Stord and Verdal yards. Net cash flow from financing activities was an outflow of NOK 190 million in the quarter and an outflow of NOK 481 million for the full year, compared with NOK nil million in fourth quarter and an outflow of NOK million for the full year. The outflow for full year mainly relates to dividend payments of NOK 412 million. Net decrease in cash and bank deposits during the quarter amounted to NOK 580 million, resulting in cash and bank deposits at the end of the quarter at NOK million. Undrawn committed long-term credit facilities amounted to NOK 2.5 billion, providing access to capital totalling NOK 3.6 billion. Balance sheet Net cash was NOK 650 million at the end of fourth quarter, compared to NOK million reported at the end of third quarter. Net current operating assets (NCOA) were negative NOK 514 million at the end of fourth quarter, compared to negative NOK 840 million at the end of previous quarter. The equity ratio at the end of the year was 36.4 percent, up from 35.8 percent in prior quarter. Order intake and backlog The order intake in the fourth quarter totalled NOK million compared to NOK million in fourth quarter. At 31 December, order backlog amounted to NOK million. Approximately 50 percent of the order backlog is for execution in 2013, approximately 30 percent for 2014 and approximately 20 percent for 2015 and later. Announced order intake from 1 January to 12 February 2013 totals NOK 5 billion. ² Invoicing in excess of cost and estimated earnings less amounts billed in advanced but not received (on a project by project basis) Kværner ASA 3 4th quarter report

5 The Kvaerner share Indexed share price development last 12 months Kværner ASA Oslo Børs Benchmark Index The share price increased from NOK at the end of third quarter to NOK at the end of fourth quarter. The highest traded share price during fourth quarter was NOK 17.60, the lowest traded share price was NOK and the average share price during the quarter was NOK The average daily turnover during fourth quarter was shares compared to shares during third quarter. The market capitalisation was NOK 4.36 billion at the end of fourth quarter compared to NOK 3.98 billion at the end of third quarter. Transactions in treasury shares 2 November, Kværner ASA acquired treasury shares in the open market at an average price of NOK per share. Later in November, the company awarded treasury shares as bonus shares under its obligations to qualifying employees in relation with Aker Solutions' 2010 share purchase programme. The share price of NOK equals the volume-weighted average share price of Kværner ASA shares on the Oslo Børs (the stock exchange in Oslo) Friday 14 September as this was an adjustment to the award made 18 September. Following the transaction, Kværner ASA holds no treasury shares. OPERATIONAL REVIEW Health, Safety, Security and Environment (HSSE) 7,00 6,00 5,00 4,00 3,00 2,00 1,00 0, Sick leave (%) LTIF (per mill manhours) TRIF (per mill manhours) HSSE Status During fourth quarter Kvaerner had a total of 14 recordable Incidents. Two of these resulted in Lost Time. The majority of the incidents were hand and leg related. During fourth quarter Kvaerner had a total of four serious near miss incidents, one resulting in lost time injury. Initiatives To increase sharing and learning of excellent HSSE performance and positive HSSE initiatives within the organisation, Kvaerner initiated the HSSE Keystone award programme in. Overall 23 nominations in three 2013 Kværner ASA 4 4th quarter report

6 categories; projects, offices and departments and individuals were received across the organisation. Emergency preparedness exercises have been carried out in accordance with plans both at Corporate and project level. Segments The business of Kvaerner is for reporting purposes organised in two segments: Upstream and Downstream & Industrials. The Upstream segment includes the business areas North Sea, Jackets, Concrete Solutions and International. The Downstream & Industrials segment comprises the business area Engineering & Construction (E&C) Americas. The Upstream segment Amounts in NOK million Q4 Q4 Total revenue and other income EBITDA EBITDA margin 5.0 % 13.2 % 6.2 % 14.4 % Net current operating assets (1 009) (1 837) (1 009) (1 837) Order intake Order backlog Employees Operating revenue from the Upstream segment totalled NOK million in fourth quarter, compared to NOK million in fourth quarter. The revenue increase is mainly due to higher activity within North Sea business area. EBITDA amounted to NOK 136 million, resulting in an EBITDA margin for the quarter of 5.0 percent, compared to NOK 287 million and 13.2 percent in fourth quarter. EBITDA in the quarter reflects a project portfolio with a relatively wide margin range with limited contribution from projects awarded early in the market cycle, some projects not yet recognising margin ie. not yet reached 20 percent completion while others passed 20 percent completion in the quarter. The Nordsee Ost offshore wind jacket project still has commercial challenges and is proceeding with arbitration. The NCOA end of fourth quarter was negative NOK million, an increase of NOK 392 million during the quarter. The disputed Nordsee Ost project will be tying up working capital until arbitration is resolved. Order intake of NOK million in the quarter mainly reflects growth in existing contracts and award of offshore hook-up and commissioning assistance for ConocoPhillips Eldfisk 2/7S project. The order backlog was NOK million at the end of fourth quarter. Operations The Hebron GBS project has achieved significant progress on detailed engineering, and construction is under way at the Bull Arm site in Newfoundland and Labrador. The project has progressed Bull Arm site refurbishment work sufficient to allow the beginning of GBS construction, and to date the GBS steel skirts have been installed to progress base slab construction. In the Jackets business area, high activity continues. Both Edvard Grieg and Martin Linge have started fabrication at the yard and with subcontractors. Both Clair Ridge jackets are in the end of the assembly phase and on track for delivery during spring Thirty-one wind jackets, including the transformer jacket for the Nordsee Ost project, have been completed. Seventeen have been delivered to Germany and the remaining fourteen are presently stored at Verdal. The activity level increased within the North Sea business area with three major projects on-going. Edvard Grieg topside project is moving forward with detailed engineering and procurement while the Eldfisk 2/7S topside project is progressing in the assembly phase at Stord. Detailed engineering has started on Nyhamna onshore project and main subcontracts are being established. Market Kværner still sees a strong market and expects new development projects to be awarded in the market over the next years both on the Norwegian Continental Shelf and internationally. However, the competition is fierce both 2013 Kværner ASA 5 4th quarter report

7 from South East Asia and Europe, and several projects have been awarded to competitors during the last period. In 2013, several FEEDs for new development projects will be executed. These projects are expected to be tendered for in Within Concrete substructures, there is increasing demand due to new oil and gas developments in Arctic areas like the Kara Sea, Russia, Canada and Alaska. Several operators are increasing their Arctic activities and Kvaerner has been successful in being awarded studies within these markets. Kvaerner holds a unique position in this market. Internationally, the tender for Woodside s Browse project was submitted in April, and the final investment decision is expected in first half of Several other activities related to pre-qualification and FEEDs are ongoing. The Downstream & Industrials segment Amounts in NOK million Q4 Q4 The figures above include EPC Center Houston operations. Total revenue and other income EBITDA 1) 7 (15) 62 (351) EBITDA margin 2.7 % (1.8%) 3.3% (14.5%) Net current operating assets Order intake Order backlog Employees ¹ Including a net positive effect of NOK 42 million from divestment of EPC Center Houston operations in third quarter. Downstream & Industrials had operating revenues of NOK 261 million in fourth quarter, compared to NOK 850 million in fourth quarter. The reduction in revenue is due to both sale of EPC Center Houston operations and lower activity. The EBITDA was NOK 7 million, giving an EBITDA margin of 2.7 percent. EBITDA in the quarter is affected by legal costs on disputed projects and limited results are expected as long as the Longview arbitration process is on-going. EBITDA includes a net positive effect of NOK 42 million from divestment of EPC Center Houston operations, accounted for in third quarter. The NCOA at the end of fourth quarter were NOK 596 million, a decrease of NOK 10 million during the quarter. The NCOA level is still unusually high as a substantial amount of capital is tied up in the Longview project. The order backlog increased by NOK 681 million from previous quarter end to NOK million at year end. The order intake in the quarter of NOK 981 million, includes the contract awarded to build the Garrison Energy Center, a 309MW combined cycle gas-fired power plant in Dover, Delaware with Kvaerner s joint venture partner Parsons Brinckerhoff Inc. Operations Construction for the ATI Mill Project is underway with the first mill housing installed in January The project will continue through the fall of Kvaerner continues repair work on A blast furnace in Granite City, Illinois for US Steel Corporation pursuant to its strategic alliance. Maintenance and small capital projects in the iron and steel sector remain on plan. Market In the Downstream & Industrials segment, new gas fired power plant tender opportunities continue to arrive due to the low cost of natural gas and retirement of coal fired plants. A large number of these opportunities will be in union labour markets where Kvaerner operates. In addition, opportunities are developing for environmental upgrades at existing power plants. The major steel producers in North America are beginning several upgrades in the primary and finishing areas in the near term, creating strong opportunities for both maintenance and capital projects Kværner ASA 6 4th quarter report

8 Unallocated costs Unallocated costs, which are net corporate costs not directly attributable to the individual segments, amounted to NOK 24 million in the fourth quarter, down from NOK 37 million in the previous quarter. For the full year unallocated costs amounted to NOK 140 million compared to NOK 147 million for full year. Some of the costs were associated with the listing of Kværner ASA on Oslo Børs in July, while some of the costs were related to the build-up of project execution capabilities. It is expected that the recurring level of net corporate costs will be around NOK million annually. SUBSEQUENT EVENTS The Board propose dividend of NOK 0.55 per share The Board of Directors has in accordance with the dividend policy proposed to pay a semi-annual dividend of NOK 0.55 per share in April The Annual General Meeting (AGM) is scheduled for 10 April at 09:00 CET. Subject to approval by the AGM, the dividend payment will take place on or about 24 April 2013 to shareholders of record as per the date of the AGM. The shares will be traded exclusive dividend from and including 11 April Increase in the Nyhamna onshore framework agreement In April Kvaerner signed a framework agreement with A/S Norske Shell for Engineering, Procurement, Construction and Management (EPCM) for modifications and projects at the Ormen Lange/Nyhamna onshore facilities. Based on the completed front end engineering and design (FEED) work for the Nyhamna Expansion project, the estimated value of the framework agreement has been adjusted to include an addition of approximately NOK 5 billion, giving an estimated total value of the contract of NOK 11 billion. PRINCIPAL RISKS AND UNCERTAINTIES Operational risk is the ability to deliver existing contracts at the agreed time, quality, functionality and cost. Delivering projects and equipment in accordance with the contract terms and the anticipated cost framework represents a substantial risk element, which will be the most significant factor affecting Kvaerner s financial performance. Results also depend on costs, both Kvaerner s own and those charged by suppliers, and on interest expenses, exchange rates and customers ability to pay. For an overview of major current legal disputes, please see note 6 to the condensed consolidated interim accounts. Kvaerner has established guidelines and systems to manage its exposure in the financial markets. These systems cover currency, interest rate, counterparty and liquidity risks. Kvaerner works systematically with risk management in all its business areas, and has extensive systems and procedures in place. Other relevant risk factors are further described in the annual report for. OUTLOOK Kvaerner expects the activity level for 2013 to be higher than historically. The company has secured 2013 revenues of approximately NOK 10.6 billion as of year-end, and expects 2013 revenues to be NOK 13 billion with upside, including incorporated joint ventures revenue of an estimated NOK 2.5 billion. For the Upstream segment, Kvaerner still expects a normalised EBITDA margin in the range of 5-10 percent. The results for the Downstream & Industrials segment are expected to be around break-even until the Longview arbitration has been resolved, reflecting that there is still a high degree of uncertainty with regards to legacy projects. The high order intake during and continued opportunities into 2013, provides a good foundation for the activity level over the next years. Going forward, the focus will be on execution and further improving cost competitiveness. Oslo, 12 February 2013 The Board of Directors and President & CEO Kværner ASA 2013 Kværner ASA 7 4th quarter report

9 FURTHER INFORMATION Investor relations: Ingrid Aarsnes, SVP Investor Relations, Kvaerner, Tel: , Mob: Media: Mariken Holter, SVP Corporate Communications, Kvaerner, Tel: , Mob: About Kvaerner: With more than HSE-focused and experienced employees, Kvaerner is a specialised provider of engineering, procurement and construction (EPC) services for offshore platforms and onshore plants. Kværner ASA, through its subsidiaries and affiliates ("Kvaerner"), is an international contractor that plans and realises some of the world's most demanding projects as a preferred partner for upstream and downstream oil and gas operators, industrial companies and other engineering and fabrication contractors. In, the Kvaerner group had consolidated annual revenues of close to NOK 11 billion and the company had an order backlog at 31 December of more than NOK 21 billion. Kvaerner was publicly listed with the ticker "KVAER" at the Oslo Stock Exchange on 8 July. For further information, please visit FINANCIAL CALENDAR 2013 Annual General Meeting: 10 April 2013 First quarter results 2013: 7 May 2013 Second quarter results 2013: 16 August 2013 Third quarter results 2013: 25 October Kværner ASA 8 4th quarter report

10 FINANCIAL STATEMENTS INTERIM CONDENSED CONSOLIDATED INCOME STATEMENT Amounts in NOK million Q4 Q4 Total revenue and other income Operating expenses (2 811) (2 755) (10 275) (12 222) EBITDA Depreciation and amortisation (19) (18) (66) (54) Operating profit Net financial income/(expense) (17) (106) (31) (109) Profit from associated companies and jointly controlled entities (6) (6) (7) (6) Profit before tax Income tax expense (21) (38) (131) (344) Net profit Attributable to: Equity holders of the parent company - Kværner ASA Basic and diluted earnings per share (NOK) INTERIM CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Amounts in NOK million Q4 Q4 Net profit/(loss) for the period Other comprehensive income: Cash flow hedges, net of tax (1) 4 (15) 1 Translation differences, foreign operations (31) 89 (50) 15 Total comprehensive income Attributable to Equity holders of the parent company - Kværner ASA Kværner ASA 9 4th quarter report

11 INTERIM CONDENSED CONSOLIDATED BALANCE SHEET Amounts in NOK million Assets Non-current assets Property plant and equipment Intangible assets Deferred tax assets Investments in associates and jointly controlled entities Interest bearing receivables Other non-current assets Total non-current assets Trade and other receivables Interest bearing receivables - 25 Prepaid company tax Total cash and bank Total current assets Total assets Equity and liabilities Equity Share capital Share premium Retained earnings Other reserves (197) (133) Total equity Non-current liabilities Interest-bearing loans Deferred tax liabilities 1 10 Employee benefit liabilities Total non-current liabilities Current liabilities Trade and other payables Tax liabilities Provisions Interest bearing liabilities (0) 8 Total current liabilities Total equity and liabilities Kværner ASA 10 4th quarter report

12 INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGE IN EQUITY Amounts in NOK million Total paid in capital Retained earnings Hedging reserve Currency translation reserve Total equity Equity as of 1 January (8) (131) Profit for the period Other comprehensive income Total comprehensive income Proforma adjustments - (589) - - (589) Separation from Aker Solutions on 7 July 820 (820) Equity as of 31 December (6) (126) Profit for the period Other comprehensive income - 0 (15) (50) (65) Total comprehensive income (15) (50) 173 Employee share purchase programme - (5) - - (5) Dividend - (412) - - (412) Equity as of 31 December (21) (176) INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS Amounts in NOK million Q4 Q4 Cash flow from operating activities (293) 322 (748) Cash flow from investing activities (23) (77) (91) (231) Cash flow from financing activities (190) - (481) (1 105) Translation adjustments (75) 55 (29) 8 Net increase/(decrease) in cash and bank deposits (580) 300 (1 349) (259) Cash at the beginning of the period Cash at the end of the period Kværner ASA 11 4th quarter report

13 SEGMENT INFORMATION Upstream Downstream & Industrials Group activities and eliminations Consolidated Amounts in NOK million Q4 Q4 Q4 External revenue and other income (24) (3) Internal revenue 24 9 (0) 10 (24) (20) - - Total revenue and other income (48) (23) EBITDA (15) (24) (24) Depreciation and amortisation (16) (16) (2) (2) (1) (0) (19) (18) EBIT (17) (24) (24) Net current operating assets (1 009) (1 837) (101) (17) (514) (1 235) Q4 Q4 Q4 Q4 Q4 Upstream Downstream & Industrials Group activities and eliminations Consolidated Amounts in NOK million FY FY FY External revenue and other income Internal revenue (79) (40) - - Total revenue and other income (56) (9) EBITDA (351) (140) (146) Depreciation and amortisation (57) (45) (8) (9) (1) (0) (66) (54) EBIT (360) (141) (146) FY FY FY FY FY Included in full year EBITDA is a net positive effect of NOK 42 million from divestment of EPC Center Houston operations Kværner ASA 12 4th quarter report

14 NOTES Note 1 General Kværner ASA (the company) is a company domiciled in Norway. The Kvaerner group consists of Kværner ASA and its subsidiaries. Note 2 Basis for preparation Statement of compliance The condensed consolidated interim financial statements have been prepared in accordance with the International Financing Reporting Standard ("IFRS") IAS 34 Interim Financial Reporting for interim reporting as adopted by the European Union and additional Norwegian regulations. Accounting principles The accounting principles applied in these condensed consolidated interim financial statements are the same as those applied in the Annual accounts. The interim financial statements are condensed and do not include all the information required by IFRS for a complete set of financial statements and should be read in conjunction with the full year combined financial statements for Kværner ASA. The consolidated financial statements for Kvaerner for the year ended 31 December are available upon request from the company s registered office at Drammensveien 264, 0283 Oslo, Norway or at The interim financial statements have not been subject to audit or review by independent accountants. The functional currency of the entities within Kvaerner is determined based on the nature of the economic environment in which it operates. The functional currency and presentation currency of Kværner ASA is NOK. Numbers are rounded to the nearest million, unless otherwise stated. As a result of rounding differences, numbers or percentages may not add up to the total. Upon adoption of the revised IAS 19 Employee benefit amendments as from 1 January 2013, Kvaerner will recognise unrecognised net actuarial losses in other comprehensive income. Kvaerner estimates that adopting the revised standard will reduce shareholders equity by 10.7 MNOK at 1 January Further information will be included in Kvaerner s Annual Report and Q report. On 1 January, Kvaerner adopted revised IAS 24 Related Party disclosures. Following the revised definition of related party in the standard, Aker Solutions is not considered as a related party of Kvaerner in Kvaerner s financial statements as from. The condensed consolidated interim financial statements reflect all adjustments, consisting only of normal, recurring adjustments that, in the opinion of Kvaerner s management, are necessary for a fair presentation of the results of operations for the periods presented. Operating results for the periods presented are not necessarily indicative of the results that may be expected for any subsequent interim period or annual accounts. Note 3 Judgments, estimates and assumptions In applying the accounting policies, management makes judgments, estimates and assumptions that affect the reported amounts of assets, liabilities, income and expenses. The estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Revision to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. In preparing these condensed consolidated interim financial statements, significant judgements made by management in applying the group's accounting policies and key sources of uncertainty in the estimates were consistent with those applied for the period ended 31 December Kværner ASA 13 4th quarter report

15 Note 4 Financial items Amounts in NOK million Q4 Q4 Net interest income/(expense) (10) 9 (28) 11 Profit/(loss) on foreign currency contracts 0 (7) 4 (11) Net foreign exchange gain/(loss) (6) (107) (7) (112) Other financial items, net (0) (0) (0) 2 Net financial income/(expense) (17) (106) (31) (109) Note 5 Share capital and equity Kværner ASA has shares issued each with a nominal value of NOK Kvaerner currently has no share-based compensation that results in a dilutive effect on earnings per share. Basic and diluted earnings per share have been calculated based on the following average number of outstanding shares: NOK thousand Q4 Q4 Shares issued Effect of own shares held (3) - (220) - Average number of outstanding shares Note 6 Contingent events Given the scope of the group s worldwide operations, group companies are inevitably involved in legal disputes in the course of their activities. Provisions have been recognised to cover the expected outcome of any disputes and litigation proceedings in accordance with applicable accounting rules. Such provisions will be based on management's best evaluations and estimates of a likely outcome of the dispute and will be subject for review by in-house or external legal advisors. However, the final outcome of such disputes and litigation proceedings will always be subject to uncertainties, and resulting liabilities may exceed recognised provisions. The disputes and litigation proceedings are continuously monitored and reviewed, and recognised provisions are adjusted to reflect management s best assessment of most recent facts and circumstances. Litigation and arbitration costs are recognised as they occur. Significant, current disputes In, arbitration was initiated against Longview and Foster Wheeler North America Corp. related to the Longview project delivered in. In, arbitration related to the on-going Nordsee Ost project was filed. Due to uncertainties related to these events and to avoid prejudicing Kvaerner's position, no estimate of the expected final outcome is disclosed. Note 7 Related parties The group has several related party relationships including with Aker Kværner Holding AS of which Kvaerner is an associated company, associates and joint ventures of Kvaerner and with certain of Kvaerner s directors and executive officers. Aker Kværner Holding AS owns 41 percent of Kværner ASA and is controlled by Aker ASA (70 percent) which in turn is controlled by Kjell Inge Røkke and his family through TRG Holding AS and The Resource Group AS. In accordance with IAS 24, all entities controlled by Aker ASA, associated companies and joint ventures of Kvaerner and certain other related parties are reported as related parties to Kvaerner. Kvaerner believes that all transactions with related parties have been based on arm's length terms. Year to date, NOK 158 million was recognised as revenue from related parties and NOK 107 million as operating expenses from related parties. Interest bearing loans and other receivables to related parties amounted to NOK 50 million and trade and other payables to NOK 19 million as per year end Kværner ASA 14 4th quarter report

16 Note 8 Sale of EPC Centre Houston operations On 16 July, Kvaerner closed the transaction with IHI E&C International Corp, a US subsidiary of the Japanese company IHI Corporation ( IHI ) to sell the on-going operations and related assets of EPC Centre Houston. All completed contracts with related assets and liabilities, including warranties and legacies will be retained by Kvaerner. Following the sale, a net positive EBITDA effect of NOK 42 million from the divestment and adjustments resulting from management s reassessment of the retained assets and liabilities was recognised in third quarter. The sold assets were part of the Downstream & Industrials segment, but is not considered a separate major line of business and is consequently not classified and presented as discontinued operations in the group accounts. Historical operating revenue and EBITDA related to EPC Center Houston operations Amounts in NOK million YTD (Q2) FY FY 2010 FY 2009 Operating revenue EBITDA (10) (18) Note 9 Quarterly historical information Amounts in NOK million Q4 Q3 Q2 Q1 Q4 Q3 Total revenue and other income Upstream Downstream & Industrials EBITDA Upstream Downstream & Industrials (15) (39) EBITDA margin 4.1 % 4.5 % 2.8 % 6.7 % 8.3 % 6.4 % Upstream 5.0 % 5.0 % 5.1 % 10.4 % 13.2 % 12.3 % Downstream & Industrials 2.7% 10.4% 0.9% 0.5% (1.8%) (7.1%) Order intake Upstream Downstream & Industrials Order backlog Upstream Downstream & Industrials The figures above include EPC Center Houston. Please refer to note 8 for details regarding EPC Center Houston s financials Kværner ASA 15 4th quarter report