Acergy S.A. (ACGY)
Q2 2010 Earnings Call Transcript
July 14, 2010 10:00 am ET
Karen Menzel – Group Manager, IR
Jean Cahuzac – CEO
Simon Crowe – CFO
Ian MacPherson – Simmons & Co.
Kevin Simpson – Miller Tabak
Stephen Gengaro – Jefferies & Co.
Fiona Maclean – Merrill Lynch
Mick Pickup – Barclays Capital
Frederik Lunde – Carnegie
Geoffrey Stern – Cheuvreux
Eric Tonne – Arctic Securities
Henry Tarr – Goldman Sachs
Truls Olsen – Fearnleys
Geir Sandnes – RS Platou Markets
Welcome to the Acergy second quarter 2010 results conference call. At this time, all participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. I must advise you that this conference is being recorded today, Wednesday, the 14
of July 2010.
I’d now like to hand the conference over to your first speaker today, Karen Menzel. Please go ahead.
Thank you and good afternoon. Joining us on the line today are Jean Cahuzac, our Chief Executive Officer and Simon Crowe, our Chief Financial Officer. The earnings release for the second quarter which ended on May 31, 2010 can be found on our Web site along with the presentation slides we will be using during this call, which will today focus on our business and financial results.
Before we start the presentation, may I remind you that certain statements made in the course of this conference call, which express the Company’s intentions, beliefs and expectations are forward-looking statements within the meaning of the U.S. Federal Securities Laws.
Actual future results and trends could differ materially from those which are in such statements due to various factors. Details of these can be obtained from time to time in the Company’s SEC filings including the Company’s Annual Report on Form 20-F. Copies of these filings maybe obtained either from our Web site or from the SEC. May I also draw your attention to the more detailed disclosure on forward-looking statements that appears in today’s announcement.
Today’s call will run for one hour. And with that, I’ll hand over to Jean.
Thank you, Karen and good afternoon to everybody. I would like to comment briefly on our second quarter results, what we are seeing in today’s market and looking forward how are we positioning for future growth. Simon will then run through our financials before we take your questions.
I am very pleased with our second quarter results. We have delivered once more a solid performance. For continuing operation, revenue of $581 million and adjusted EBITDA of $121 million which correspond to 20.9% adjusted EBITDA margin and net income of $63 million and $0.28 diluted earnings per share.
The strength of this performance reflects in particular execution of contracts signed prior to 2009 with good profit margins, outstanding performance on several major contracts around the world and the continued strength of conventional activity in West Africa.
I would like now to comment on the market outlook. As we said in April, the more stable oil price underpins confidence in our business. This translates into positive indicators.
In the SURF market, we continue to see strong tendering activity worldwide. We expect some of the delayed major SURF contracts, particularly, in West Africa and Australia to proceed to market award this year with CLOV in Angola likely to be the next significant one to come to market award. Given the size and complexity of this project the offshore installation of most of these new large SURF projects is likely to commence beyond 2011.
We expect the conventional market in West Africa to remain strong in the short-term and medium-term, driven by the volume of work required to upgrade today’s existing infrastructure.
Our substantial local presence is a competitive strength in this market, which provides continuity and good margins and we expect to see further activity this year and in 2011.
As we said back in April, visibility on North Sea activity remains somewhat limited. The industry has seen a significant increase in tendering in the first half of the year in the U.K. Some of these projects have been slow to come to award and for shorter term SURF work, the pricing environment remains competitive.
It’s likely that this project when awarded will create a headwind on margins in the North Sea for the remainder of this year and maybe through 2011. So again, no change here.
Since our last call in April, the tragic event surrounding the Macondo incident in the Gulf of Mexico has raised question within the industry. So what does it mean for Acergy? We have very limited exposure to the Gulf of Mexico today with less than 1% backlog and therefore we do not anticipate a direct impact on our financial performance in the short or medium-term.
However, we anticipate that some the deepwater projects in the Gulf of Mexico due to come to market award over the next 12 months may be delayed until late ‘11 or possibly later. That said I do not see anything today that would lead me to change my view on the market in the short-term and medium-term. So overall, we are confident in the future.
We continue to perform strongly and to deliver excellent execution for our clients. Our view on the market remains unchanged and while our order intake in the quarter has been relatively low resulting in our backlog falling to 2.3 billion excluding joint ventures, I remain comfortable with the project in the pipeline which would be awarded to the industry in the remaining part of the year.