Aker Yards Reports Strong Growth

Friday, February 16, 2007
Aker Yards ASA reported an EBITDA of NOK 401 million for the fourth quarter of 2006, an increase of 15 percent compared with the fourth quarter of 2005. The EBITDA result for 2006 was NOK 1 443 million, up 40 percent from 2005. Earnings per share (EPS) were NOK 21.77 for the quarter, and NOK 46.56 for the full year.

Order intake in the fourth quarter was NOK 8906 million, giving an order backlog of NOK 79,420 million at the end of the quarter, comprising 149 vessels.

Aker Yards had revenues of NOK 7 815 million in the fourth quarter of 2006, an increase of 60 percent compared with NOK 4 897 million in the corresponding period of 2005. High activity in all three business areas and the acquisition of new yards contributed to the development. The pressure on subcontractors is high, and demands a careful follow up in order to reduce the risk of delays on projects. Significant integration processes are ongoing in all three business areas. The order backlog increased by NOK 1 901 million from the previous quarter, and order intake in the fourth quarter was NOK 8 906 million. Cruise & Ferries contributed a significant part of the order intake, with the order for two ferries for Stena Rederi AB representing approximately NOK 3 300 million. The order backlog at the close of the fourth quarter was NOK 79 420 million, compared with NOK 38 897 million at the end of the fourth quarter 2005. Aker Yards achieved an EBITDA result of NOK 401 million in the fourth quarter of 2006, compared with NOK 348 million in the corresponding quarter of 2005. The EBITDA margin for the fourth quarter of 2006 was 5.1 percent.

4Q Results

Aker Yards had revenues in the fourth quarter of 2006 of NOK 7 816 million, compared with NOK 4 897 million in the corresponding period in 2005. This represents an increase in revenues of NOK 2 919 million due to increased activity and recent acquisitions. In the fourth quarter of 2006, Aker Yards achieved an EBITDA of NOK 401 million, which represents an increase of NOK 53 million compared with the corresponding quarter in 2005. The EBITDA margin was 5.1 percent whereas the margin was 7.1 percent in the same period last year. Several one-off items had an impact on the figures in the fourth quarter. Recognition of negative goodwill from the acquisition of Aker Yards, France gave a positive effect of NOK 379 million. The gain represents the difference between the fair value of all assets and contracts acquired and the expected final purchase price. Impairment of goodwill from the acquisition of Aker Yards, Florø had a negative effect of NOK 28 million. New orders in Germany caused a positive deferred tax income due to previously non-recognized tax losses, with an equally impairment of goodwill of NOK 54 million. In addition, NOK 109 million has been booked as non-recurring costs, mainly coming from early retirement in Germany. The latter is due to changes in the pension system in Germany. Around 200 employees were accounted for early retirement over the next six years. A provision had to be made for the pension obligations, but the costs will be partly covered by the state in the future.

EBIT after non-recurring items was NOK 452 million. Net financial items were negative with NOK 27 million while Aker Yards’ share of profit in Aker Invest was NOK 33 million. Aker Yards pre-tax profit for the fourth quarter was NOK 459 million, which represents a NOK 267 million increase, compared with the fourth quarter of 2005. Earnings per share were NOK 21.77.

Cruise & Ferries

The Cruise & Ferries business area achieved fourth quarter 2006 revenues of NOK 3 638 million, compared with NOK 1 749 million in the corresponding period in 2005. The EBITDA for the business area was NOK 271 million in the fourth quarter, with an EBITDA margin of 7.4 percent. No vessels were delivered in the quarter. The margin level for the ferry projects was weak and will continue to be on a lower level than for cruise projects. The integration process between the Finnish and French organizations is progressing according to plan. Order intake in the fourth quarter was NOK 3 634 million. In November, Aker Yards signed a contract with Stena Rederi AB in Gothenburg (Sweden) to deliver two Super Ferries. The value of the contract was approximately EUR 400 million. Deliveries are scheduled for the first and third quarter of 2010. The contract included options for two further vessels of the same type. At the end of the quarter, the Cruise & Ferries business area had an order backlog of NOK 46 097 million, consisting of 20 vessels, more than doubled from the NOK 17 559 million in order backlog at the end of fourth quarter 2005.

All three yards in Finland - Helsinki, Rauma and Turku – currently have high capacity utilization. In France, the six cruise vessels in the order book for MSC and Norwegian Cruise Line will give gradually better capacity utilization and the capacity will be fully utilized by the end of 2007. Ensuring design and subcontractor capacity, in addition to cost efficient sub deliveries, are key factors for securing and enhancing profitability. Overall the market for the Cruise & Ferries segment continues to develop positively. The demand for large - panamax and post-panama - cruise vessels is strong. There are also many potential newbuild projects in the segment for smaller cruise vessels, while the ferry segment is less active than a year ago. The importance of the large cruise vessel segment is further emphasized by the fact that the series (number of sister ships) are expected to be longer than in the segments of small cruise vessels and ferries. The market for conversion and refurbishment of cruise vessels as well as ferries is expected to expand steadily.

Merchant Vessels

The business area Merchant Vessels had revenues of NOK 1 853 million in the fourth quarter, an increase of NOK 644 million relative to the corresponding period last year. In the fourth quarter, Merchant Vessels had an EBITDA of NOK 38 million, compared with NOK 46 million in the corresponding quarter in 2005. The EBITDA margin was 2.0 percent, compared with 3.8 percent in fourth quarter 2005. The margin was negatively influenced by projects from the new yards in Florø and Ukraine. Four vessels were ordered in the fourth quarter of 2006, to a total value of NOK 2 388 million. At the end of the fourth quarter, there were 55 merchant vessels in the order backlog. The business area had an order backlog of NOK 13 858 million; which is up 10.1 percent compared with the corresponding quarter in 2005. Eight vessels were delivered in the quarter. In October, Aker Yards announced a contract with Stolt- Nielsen Transportation Group (SNTG) to deliver four parcel tankers with stainless steel cargo tanks. The value of the contract is approximately USD 350 million. To balance the high load, availability of material and subcontracting capacity to secure the timely delivery of the current order book are main focus areas. The incorporation of the newly acquired shipyards Aker Yards, Florø in Norway and Damen Shipyards Okean in Ukraine are underway. Integration activities among all yards have been initiated. The sales and marketing activities concentrate on specialized vessel and new ship concepts to reduce the proportion of container vessels in the coming years.

Offshore & Specialized Vessels

The business area Offshore & Specialized Vessels had revenues in the fourth quarter of NOK 2 344 million. This represents a NOK 557 million increase in the business area’s revenues, compared with the corresponding quarter of 2005. Offshore & Specialized Vessels achieved an EBITDA of NOK 172 million in the fourth quarter of 2006 with an EBITDA margin of 7.3 percent. Also in the fourth quarter, the margin was negatively influenced by late deliveries from subcontractors and capacity step-up costs. Six vessels were ordered in the fourth quarter, to a total value of NOK 2 874 million. Offshore & Specialized Vessels had an order backlog of 74 ships at a total value of NOK 19 465 million at the end of the period. This is an increase of 126.5 percent from previous year. Six vessels were delivered in the quarter. In February 2007 an option to increase the ownership share in Aker Promar in Brazil was exercised, using a combination of cash and earn out in order to further strengthen the position in the region. Going forward, the results will be consolidated on a 100 percent basis. The activity level at the yards is high, and capacity utilization is high, both for hull construction in Romania and at the outfitting yards in Norway, reflecting the strong order book. Integration of all the yards in the Business Area is well underway, with processes ongoing in both Romania and Norway. Developing the capacity and cost efficiency of the yards’ suppliers and sub contractors network, as well as handling the high step-up in activity of the Romanian yards are key focus areas going forward. Offshore & Specialized Vessels experienced an active market also in the fourth quarter. The activity is still high, both for Platform Supply Vessels and Anchor Handlers. However, the market for standard Platform Supply Vessels is expected to somewhat soften going forward, due to the high order book level for such vessels. In other specialized vessels for the oil exploration and service industry, such as larger construction vessels, Aker Yards has experienced an increased demand and expects this demand to continue well into 2007. As announced in January 2007, Aker Yards is taking a strategic position in the fast growing Asian market for offshore vessels by setting up a shipyard in Vietnam. The shipyard will be a joint venture between Aker Yards (70 %) and Amanda Group (30 %). The new yard in Vietnam will strengthen Aker Yards ability to serve its international customers in the region Aker Yards currently has 15 vessels of own design in the order book.

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