Aker Solutions Slumps as Cost Overruns Sap Earnings: Oslo Mover

Aker Solutions ASA, the oil services group controlled by billionaire Kjell Inge Roekke, fell the most in 4 1/2 years in Oslo after warning first-quarter profit will trail estimates by more than 20 percent.

The Oslo-based company slumped as much as 23 percent to 81.4 kroner, the biggest intraday drop since Oct. 24, 2008. The stock traded at 81.95 kroner as of 10:50 a.m. with 4.5 million shares traded, almost four times the average daily volume during the past three months.

Aker Solutions expects to report earnings before interest, tax, depreciation and amortisation of 868 million kroner ($148.8 million) and revenue of 11.1 billion kroner, it said today. The company was expected to report Ebitda of 1.13 billion kroner, according to the average of 13 analyst estimates compiled by Bloomberg. Revenue was seen at 11.5 billion, the average of 15 estimates shows.

Earnings were hit by higher costs at the Ekofisk Zulu platform project, losses at the umbilicals and oilfield services and marine assets divisions, and lower margins at several other units due to increased costs and delays, Aker Solutions said.

Nordea Markets cut its recommendation on Aker Solutions to sell from buy and reduced its price estimate to 95 kroner from 130 kroner after the profit warning. “Performance problems now seem rampant, and we see few redeeming factors to maintain a buy rating at these levels,” analyst Anne Schult Ulriksen said in an e-mailed note.

‘Truly Disappointing’

“The slow start to 2013 is truly disappointing,” Executive Chairman Oeyvind Eriksen said in the statement. “As lost or postponed contract awards are part of the game, some of the quality issues are, simply speaking, unacceptable.”

Results in the second half of the year could fall short of the company’s five-year goals depending on timely delivery of the Ekofisk Zulu project and capacity utilization of its Aker Skandi vessel, Aker Solutions said.

No updates on the so-called Category-B rig project for Statoil ASA should be expected in “the near future,” it said.

While the company is still seeing “a high level of tender activity, the order intake in the next quarters is more at risk than in previous quarters because of recent postponements or cancellations of some projects,” Aker Solutions said.

The oil-service provider plans to double sales by 2017 and is seeking to boost its Ebitda margin to 15 percent from about 10 percent, it has said.

RS Platou Markets AS has put its 140 kroner price estimate under review, analyst Goeran Andreassen said today.

‘Major Setback’

“The reason for the profit warning is not within one particular area, creating increased uncertainty on financial performance through 2013,” he wrote in an e-mail.

“There’s a wide-spread disappointment on execution issues in several divisions, including Maintenance, Modifications and Operations and Umbilicals,” ABG Sundal Collier Holdings analyst Haakon Amundsen said by phone from Oslo. “Some of the problems slide into the second quarter, so estimates for the full-year will come down quite significantly, certainly more than 10 percent.”

Pareto Securities called Aker Solutions’ profit warning “a major setback” and cut its 2013 Ebitda estimate to 4.1 billion kroner from 5.1 billion kroner. It also expects to cut its 2014 estimate to about 5.5 billion kroner from 6.3 billion kroner, the Oslo-based broker said.

Aker Solutions, which is scheduled to announce its first-quarter results on May 8, will hold a call for investors today at 5 p.m. CET.

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