Third quarter results 2014
Highlights Third quarter 2014 High operational activity H6 rig upgrade completed ahead of time Cooperation with KBR for Sverdrup Study awarded for Subsea on a Stick Order backlog of NOK 19.4* billion Subsequent events The Hebron GBS in place at the deep-water site. Dividend of NOK 0.64 per share distributed * Including incorporated joint ventures. 2
Key financials Revenues NOK million 4 500 EBITDA NOK million 300 Net current operating assets NOK million 4 000 3 500 3 000 250 200-200 -400-570 -624-515 2 500 2 000 1 500 1 000 500 150 100 50 180 180 170 289 194-600 -800-1 000-1 200-1 266-1 162 0-1 400 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 3 080 3 939 3 489 2 861 4 004 * Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 EBITDA margin 5.9% 4.6% 4.9% 10.1% 4.8% 3 * Reflecting 20 percent completion for one major project. Note: All historical figures restated after sale of the North American Construction business in Q4 2013..
Order intake and -backlog Order intake NOK million Order backlog NOK million 6 000 30 000 5 000 25 000 4 000 20 000 19 353 3 000 2 801 15 000 ~40% 2 000 10 000 ~40% 1 000 5 000 0 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Note: All figures include incorporated joint ventures. 4 ~20% 0 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Estimated scheduling as of 30 September 2014: For execution in 2014 For execution in 2015 For execution in 2016 and later
Health, safety, security and environment One Lost time Injury Six serious incidents Total of seven recordable incidents Lost time incident frequency (LTIF) and Total recorded incident frequency (TRIF) Per million work hours and 12 months rolling averages 4,0 LTIF TRIF Highlights 3,0 Statistics improving all over 2,0 Focus on lessons learned as a part of improvement initiatives 1.70 1,0 0,0 Jul Aug Sept Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sept 0.20 5
Operational highlights Hebron GBS slip forming at the deep-water site started HEBRON GBS NYHAMNA ONSHORE Mechanical installation work started on Nyhamna site Upgrade and reclassification of Transocean Barents completed ahead of schedule TRANSOCEAN BARENTS EDVARD GRIEG TOPSIDE E. Grieg topside construction and assembly proceeding as planned Transocean: well planned, good cooperation 6
Strategic review: Exploring new opportunities Optimisation or changes to value chain? Opportunities to further strengthen and develop Kvaerner Changes to geographical priorities? Changes to products & services portfolio? 2011-2014: Several key milestones Downstream businesses sold Full focus on oil & gas Solid order backlog established A range of successful project deliveries Summer 2014: Positive momentum Kvaerner: Recognised for predictability Improved cost base under implementation Jacket agreements prove competitiveness 2012-2013: Increased competition Several key projects awarded to competitors 2013-2014: Market changes Key projects put on ice due to cost level Major clients announce investment cuts Strong competition, pressure on margins 7
Third quarter financials Eiliv Gjesdal, Chief Financial Officer
Income statement Amounts in NOK million Q3 2014 Q2 2014 Q3 2013 Restated YTD 2014 YTD 2013 Restated ¹ FY 2013 Total revenue and other income 4 004 2 861 3 080 10 354 9 021 12 960 EBITDA 194 289 180 653 456 636 Depreciation and amortisation (18) (17) (16) (50) (45) (63) EBIT 176 272 165 603 411 573 Net financial income/(expense) (15) (16) (13) (50) (42) (96) Equity accounted investees, incl. impairments 0 (58) (3) (58) (25) (78) Profit before tax 161 198 148 494 344 399 Income tax expense (49) (75) (47) (165) (117) (160) Profit from continuing operations 112 123 101 330 227 239 Profit discontinued operations (12) (27) (17) (72) (30) 206 Net profit 100 96 84 258 197 445 EBITDA margin 4.8 % 10.1 % 5.9 % 6.3 % 5.1 % 4.9 % Earnings per share (NOK) Basic and diluted EPS continuing operations 0.42 0.46 0.38 1.23 0.85 0.89 Basic and diluted EPS total operations 0.37 0.36 0.31 0.96 0.73 1.66 Note: Following sale of operations, the Downstream & Industrials segment has been classified as discontinued operations, with comparative figures restated. Revenues excluding incorporated joint ventures. 9
Upstream review Financials Very high activity level in Contractors Norway Projects with a relative wide margin range Orders Growth in existing contracts Revenues, EBITDA and EBITDA margin NOK million 5 000 4 000 3 000 4 100 4 667 4 153 3 812 4 981 Order backlog and order intake NOK million 30 000 25 000 20 000 25 657 22 809 19 698 21 512 19 358 15 000 2 000 10 000 1 000 197 197 187 312 212 5 000 1 603 1 925 1 291 5 372 2 809 0 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 0 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 EBITDA-% 4.8% 4.2% 4.5% 8.2% 4.3% Revenues EBITDA Order backlog at the end of the quarter Order intake in the quarter Note: All figures include incorporated joint ventures. 10
Financial outlook Revenues and backlog by execution year (30 Sept 2014) NOK million Backlog at 30 September 2014 Jackets Contractors Norway 18 000 16 000 14 000 12 000 10 000 8 000 6 000 Contractors International Concrete Solutions Q1-Q3 revenues Upstream revenues 2014 NOK ~17 billion EBITDA margin 2014 Slower impact from improvements Procurement growth Negative cost developments At least break even results in Jackets International business development EBITDA margin 2015 Improvements will depend on new awards with contribution in 2015 4 000 2 000 0 2011 2012 2013 2014 2015 2016+ 11
Cash flow and working capital development Amounts in NOK million Q3 2014 Q2 2014 Q3 2013 YTD 2014 YTD 2013 FY 2013 Cash flow from operating activities 102 (212) (386) (172) (88) 606 Cash flow from investing activities (17) (75) (72) (135) (133) 208 Cash flow from financing activities (14) (172) (7) (195) (189) (356) Translation adjustments 2 2 1 2 22 19 Net increase/(decrease) in cash and bank deposits 73 (457) (465) (500) (388) 476 Customer pre-payments¹ of NOK 153 million Fluctuations in working capital must be expected Capital tied up in the Nordsee Ost project Net current operating assets (NCOA) Continuing operations (NOK million) - 0 (500) (1 000) (1 500) (2 000) Q2'12 Q3'12 Q4'12 Q1'13 Q2'13 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 ¹ Invoicing in excess of cost and estimated earnings less amounts billed in advance but not received (on a project by project basis). 12
Balance sheet Amounts in NOK million 30.09.2014 30.06.2014 30.09.2013 31.12.2013 Assets Total non-current assets 2 088 2 137 2 267 2 150 Prepaid company tax 95 60 130 93 Current operating assets 4 422 2 363 3 808 3 121 Total cash and bank 1 045 972 681 1 545 Retained assets on business sold 769 744-916 Total assets 8 420 6 275 6 886 7 825 Total equity 2 663 2 511 2 348 2 511 Non-current interest bearing liabilities 485 483 477 479 Other non-current liabilities 184 184 201 170 Current operating liabilities 4 937 2 987 3 838 4 387 Current tax liabilities 110 61 22 56 Retained liabilities on business sold 40 50-223 Total liabilities 5 757 3 764 4 538 5 315 Total equity and liabilities 8 420 6 275 6 886 7 825 Equtiy ratio 32 % 40 % 34 % 32 % Net cash 563 493 256 1 069 Loan facilities of NOK 3 billion Maturity in 2016 13
Way forward and closing remarks ENGINEERING PROCUREMENT CONSTRUCTION 14
In a period with challenging conditions, Kvaerner is in a market segment with several opportunities Drivers: Some examples Energy demand / oil price Political frame conditions Feasible prospects Customers free cash flow Industry cost level reductions Market : Some examples NCS / North Sea region Sverdup: Largest project in decades ~12 new major topsides awards within 2021 Oseberg Future Development and other Subsea on a Stick prospects Canada White Rose Bay du Nord Russia Studies: Ongoing and upcoming Several new projects considered, Kara Sea oil discovery supports interest 15
Cost improvements strengthens competitive power Status re reductions of cost base.. prove competitive power Total EPC savings 17% Improved rates with KBR Examples from the improvement plan E P C Other Reduced bulk prices from suppliers Reduced own hours due to increased efficiency Industrialised work processes: 5S at Stord Improved logistics and material handling Reduced prelim cost Optimized delivery model Improved project management Price Benchmark from ongoing projects confirms status: Eldfisk delivered on time and schedule Edvard Grieg on track to delivery on time and schedule Quality Delivery on time 16
Competitive power strengthened last 20 months Improvements through the value chain Cost reductions % 100% 100 E P C 83% Average cost development in typical recent and ongoing EPC projects from competitors Cost vs bid 0 Old cost base Engineering Procurement Construction New cost improvements improvements improvements base Bid price Management follow-up Transport time & delays Quality & cost issues Total cost 17
Summary Continued high activity Positive opportunities for offshore platform market Cost improvements strengthens competitive power Strategic Review process ongoing Solid balance sheet Sustained dividend policy HSSE core value and licence to operate Maintain and develop home markets International expansion Hands-on management 18
APPENDIX 20
Balanced portfolio, solid platform for new contracts 2014 2015 2016 2017 2018 2019 Value at award Eldfisk topside Edvard Grieg topside Aasta Hansteen compl. Nyhamna onshore Edvard Grieg jacket Martin Linge jacket Sverdrup jackets Hebron GBS Enping Phase II engineering Options NOK 5.5 B NOK 8 B Undisclosed NOK 11 B NOK 1.1 B NOK 1.2 B NOK 3 B USD 1.5 B Undisclosed Contractors Norway Jackets Concrete Solutions Contractors International 21
Revenue distribution continuing operations Share of revenues 2012 Percent Share of revenues 2013 Percent Share of revenues last 12 months Percent NOK 8.9 billion NOK 13.0 billion NOK 14.3 billion Contractors International Concrete Solutions Jackets Contractors Norway 22
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