Aker Solutions Maintains Growth Target on Market Outlook

Aker Solutions ASA (AKSO), Norway’s biggest oil platform maker, maintained its five-year growth target because of a “favorable market outlook” for the oil services industry.

The company expects annual revenue growth from 2011 to 2015 of 9 percent to 15 percent, according to a statement today. It kept a plan to improve the margin on earnings before interest, tax, depreciation and amortization by 3 to 4 percentage points by 2015. Aker is increasing capital spending to build capacity for growth and that it will be “tougher” to lift margins in the “near term,” it said.

“We are accelerating our investments in technology and in strengthening our organization, and we continue to address the quality issues we have identified in the company,” Executive Chairman Oeyvind Eriksen said. “This will make it challenging to secure a lift in margins in the near term, but we remain confident in the longer-term margin-improvement targets we have set out.”

Surging oil prices and dwindling output from areas such as the North Sea have spurred a boom in exploration in new areas off Africa, South America and Asia. Companies will increase global spending on exploration and production 11 percent this year to $490 billion, Barclays Plc estimated in December.

Expansion Outside Norway

Statoil ASA, Norway’s largest oil and natural-gas operator, and billionaire Kjell Inge Roekke’s Aker companies are seeking to expand outside Norway, where oil production has halved over the past decade as North Sea fields dry up. At the same time, producers are increasing spending offshore the Nordic country to raise recovery rates and drilling more wells in the Arctic to tap new resources.

While the oil-service market may grow more than the company’s earlier forecasts, expansion through mergers and acquisitions has become less certain due to “exorbitant valuations and a limited number of attractive targets,” Eriksen said at a capital markets day today in Oslo.

Aker Solutions said last month its third-quarter net income more than tripled as it booked a gain after separating out Kvaerner ASA. The company posted a loss for its continuing business because of delays in contracts in Brazil. Delivery schedules for all major subsea production systems on order from Petroleo Brasileiro SA (PETR4) have been “substantially” further delayed and additional costs are expected, it said Nov. 3.

While recent changes to its management structure, including the appointment of managers for operations in Brazil and U.S., will improve operations, the mismanagement problems will not be “resolved overnight” and improvement will be gradual, Eriksen said in an interview.

Identifying Risks

“It’s up to the new management team to identify the risks and to gradually improve,” Eriksen said. “It’s more a burden on profitability than significant losses going forward.” Aker Solutions booked a third-quarter loss of 500 million kroner ($87 million) in its subsea operations offshore Brazil.

Aker Solutions aims for revenue growth, excluding acquisitions, of 6 percent to 10 percent a year, it said today. The order intake has been “strong” over the past year, with its order backlog rising 23 percent. It expects continued “strong markets and tender activity.”

The company also said today that its dividend policy is unchanged.

Aker Solutions fell as much as 4.7 percent, the most in a week, and were down 1.8 percent at 67.55 kroner as of 1:07 p.m. in Oslo. The shares have declined 22 percent this year.

To contact the reporter on this story: Meera Bhatia in Oslo at mbhatia2@bloomberg.net Stephen Treloar at streloar1@bloomberg.net

To contact the editor responsible for this story: Christian Wienberg at cwienberg@bloomberg.net

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