Kvaerner ASA announced a record 1999 pre-tax loss, hit by restructuring costs and weak non-core operations, but forecast an upturn at its core businesses in 2000. London-based Kvaerner recorded a pre-tax loss of $667 million from $205.5 million a year earlier after a sweeping restructuring plan was launched in April, which aimed to sell off non-core activities.
"We have all seen that the goal is within sight. It is far away but still in sight," Chief Executive Kjell Almskog said. "We will see setbacks also this year, but hopefully smaller and fewer (than in 1999)." Almskog said a planned restructuring into a "New Kvaerner," to include only core business areas, would take another one to two years. "2000 is destined to be a year of continuing improvement for the core businesses of Kvaerner," he said.
Analysts said results for non-core areas were disappointing, while core operations had performed stronger than expected. "Non-core was weaker than we had forecast, but the development for 'New Kvaerner' is positive for outlooks," said analyst Tor Vinje at DnB Markets, adding that the market was awaiting further steps in the planned exit of shipbuilding.
Kjell Erik Eilertsen, analyst at Christiania Markets, said Kvaerner had done "an impressive job with restructuring," estimating Kvaerner's Masa-Yards in Finland could be sold during the first quarter of 2000. "There is a tight dialogue over the sale of Masa. It is moving in the right direction," he said.
Kvaerner booked operating profits, excluding sales gains and exceptional items, of $2.2 million against $7 million in 1998. The biggest losses were from non-core operations. It recorded exceptional costs of $633.4 million.
Group Sees Progress In Restructuring
The group's restructuring plan to slash 25,000 jobs and withdraw from non-core activities such as shipbuilding, pulp and paper and energy, was launched after the group posted a 1998 pre-tax loss, the first annual loss in more than 30 years.
The "New Kvaerner," which includes engineering, construction and oil and gas, booked an operating profit of $81.4 million against a loss of $21.8 million a year before.
"1999 was a year of comprehensive restructuring for the group to restore profitability and financial strength," Almskog said. "Significant progress has been made, but the task of restructuring has been expensive, and this has clearly been reflected in the 1999 results."
Among the biggest loss-making operations, shipbuilding recorded a pre-tax loss of $17.2 million, compared with a profit of $3.1 million in 1998, mainly hit by weak operations and cost overruns at its Masa- Yards in Finland.
Kvaerner, which failed in its plan to sell off all of its 13 yards by the end 1999, said it had set up a corporate task force to implement "a comprehensive improvement program" for shipbuilding, while it was negotiating with potential buyers for the unit.
In its core businesses, Kvaerner said it expected a general positive economic situation to boost results. "The global economic climate gives us scope for measured optimism in the market that we operate," Almskog said.
Kvaerner said it had reached a cost-saving target of $120.9 million per year, set in April. "Further cost savings are expected to be achieved in 2000," it said.
The "New Kvaerner" had seen overhead cost savings of $133 million in the first year
in addition to $62.9 million for none-core businesses not yet disposed of, it said. - (Reuters)