Results signal Kvaerner 'back on track'

Kvaerner ASA, the Anglo-Norwegian engineering and construction group, today claimed its first half results signaled the wholesale restructuring initiated last year by CEO Kjell Almskog is starting to bear fruit, although the company acknowledged its oil and gas business still needs 'strengthening to adapt to the significant changes in the marketplace.' Kvaerner's operating profit for the first half of the year totaled 541 million kroner�up 804 million kroner from the same period in 1999.


Darius Snieckus
OGJ Online

STAVANGER�Kvaerner ASA, the Anglo-Norwegian engineering and construction group, today claimed its first half results signaled the wholesale restructuring initiated last year by CEO Kjell Almskog is starting to bear fruit, although the company acknowledged its oil and gas business still needs "strengthening to adapt to the significant changes in the marketplace."

Kvaerner's operating profit for the first half of the year totaled 541 million kroner�up 804 million kroner from the same period in 1999. Pretax profit for the period was 155 million kroner, and turnover totaled 28.5 billion kroner. The group's order backlog at the end of the second quarter was 65 billion kroner, up about 5.5 billion kroner over the previous quarter.

"These positive results clearly demonstrate that Kvaerner is now starting to get back on track," stated Almskog. "Our group is gradually making the transition from restructuring and downscaling mode to one of building its core businesses to secure the long-term success for both shareholders and employees.

"During the last 12 months, the core businesses have significantly improved their performance. And after more than 12 months of comprehensive restructuring, the time is right to start preparing for the more long-term growth and success of the group."

The group's oil and gas business saw operating profit for the second quarter of 43 million kroner, translating to a half-year result of 49 million, still down some 15 million vs. the same period in 1999. These figures include restructuring costs totaling 69 million.

In the first 6 months of the year, the oil and gas division's order intake amounted to 8.0 billion kroner, of which 5.8 billion was booked in the second quarter. The major order clinched this year was a 3.5 billion kroner contract won in May to design and build the production module for Norsk Hydro's Grane field in the Norwegian North Sea.

Key to Kvaerner's longer-term ambitions include its proposed takeover of rival Norwegian contractor Aker Maritime ASA, which Almskog maintains would make the "new" Kvaerner one of the "few large, global players" in an oil and gas services sector that is in the midst of a sea change.

"The rationale for this bid is to create a Norwegian-based global player with a complete range of products and services for the most attractive segments and regions of the oil and gas services worldwide. We believe in the sound industrial logic of combining these activities�and we have reason to believe there is significant support for that logic from a broad stakeholder base too," he said.

"The oil and gas services industry is fast changing," he stressed, "from one with a large number of regional players to one dominated by a few large global players. And it's Kvaerner's ambition to be one of them."

Bid documents outlining the hoped-for takeover�being floated chiefly as an ideal marriage of " Kvaerner's prominent position in subsea solutions and Aker Maritime's recognized deepwater technology�are being sent out to Aker shareholders starting next week, said Kvaerner. This is Kvaerner's fourth attempt to buy Aker, the first three making no headway with Aker's majority shareholder, the Norwegian businessman Kjell Inge Røekke.

Kvaerner further argues that hitching the two would create a combined company with synergistic regional market strengths in the North Sea and the US Gulf of Mexico and "enhance the opportunities to win projects in emerging markets such as the Caspian Sea and the waters off Brazil and West Africa."

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