Aker Solutions Tones Down Focus on Earnings Goals, Chairman Says

Aker Solutions has “toned down” the focus on its five-year earnings targets as the Norwegian oil-services company focuses on increasing profitability amid rising costs and growing competition.

“You won’t hear us talk about the five-year targets today,” Executive Chairman Oeyvind Eriksen said in an interview at the company’s capital markets day presentation in Oslo. “We have the potential to grow in line with what we have guided before, but that’s not what we should be measured on.”

Shares in Aker Solutions fell after Eriksen’s comments, having earlier gained as much as 1.3 percent, and traded 0.2 percent lower at 105.6 kroner as of 1 p.m. local time.

Aker Solutions, controlled by billionaire Kjell Inge Roekke, is streamlining its business by selling assets to improve earnings and focus on higher margin industries. In the last two months the company has sold its mooring and loading systems unit and its well-intervention services operations for 5.4 billion kroner ($883 million) and said today it expects to sell its oilfield services and marine assets in 2014.

At last year’s capital markets day Aker Solutions said it was seeking to increase its margin on earnings before interest, tax, depreciation and amortization to 15 percent in 2017. The company also planned to double revenue between 2010 and 2015.

“We’ve toned down the focus” on these targets, Eriksen said. “We have to become more profitable but I will not today give you any guidance on the five-year targets because what we have learned in the past is that we lose focus on the short-term improvement.”

Hurdle Rate

The company has set new investment criteria for projects, “moving the hurdle rate” for margins up to 15 percent, Aker Solutions said. “This focus will mean challenging the business rationale for each investment and testing it against whether a share buyback would yield a better return for investors.”

Since the latest two asset sales, Roekke’s Aker ASA holding company has increased its stake in Aker Solutions in a move seen by some analysts, including Turner Holm at RS Platou AS Markets, as a signal the company will pay a special dividend.

Aker Solutions will consider its dividend level and possible share buybacks in the “longer term,” Eriksen said. “In the short term we will reduce the level of debt,” he said.

“As of today, the key message is that the dividend policy is unchanged and we have enhanced financial flexibility,” Eriksen said, without providing further detail. Eriksen is also Aker’s chief executive officer.

Aker Solutions plans to pay out 30 percent to 50 percent of net income through cash dividends and share buybacks, the company said in presentation material today.

The company, which last announced an extraordinary dividend in 2006 after the sale of its pulp and paper unit, made annual payments of 4 kroner per share for 2012 and 3.9 kroner for 2011. Investors will probably see annual dividends of 3 kroner, 4 kroner and 5 kroner for 2013, 2014 and 2015 respectively, according to Bloomberg dividend forecasts.

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