Presentation of 3Q results
The Board of Directors of Scana Industrier ASA has today approved the accounts
for 3(rd) quarter 2010.
A presentation of the company and the 3(rd) quarter 2010 results was done
Wednesday October 20(th) at 17:30 hrs at Radisson Atlantic Hotel in Stavanger.
The presentation will also be given on Thursday October 21(st) at 08:00 hrs at
Hotel Continental, Oslo.
A web-cast of the presentation (Norwegian) and the presentation material will
be available on Scana's home page (www.scana.no) by the end of Friday 22(nd)
October.
For further information please contact:
Rolf Roverud, CEO Scana Industrier ASA, Mobile: +47 91 16 75 81
Christian Rugland, CFO Scana Industrier ASA, Mobile: +47 95 29 52 55
__________________________________________________
Weak market continues - recovery expected in 2011
· Key contracts won within the marine and energy segments and the order
inflow in September is the strongest since November 2008
· 3rd quarter result affected by summer closure in the steel companies,
and the continued unfavourable product composition
· Gradually improved product composition and increased order inflow are
expected to have a positive affect on the result in 2011
· Measures implemented to dispose of the assets that are not core
activity. Scana's board has also decided to strengthen the efforts to create
future growth and shareholder value
Operating revenue totalled NOK 397 million in the third quarter, compared with
NOK 457 for the same period in 2009. The operating result was NOK -23 million
compared with NOK 38 million last year. The operating revenue and result in the
third quarter are characterised by summer closure and maintenance stoppages in
the steel companies and a less optimal product composition than in the same
period in 2009. Cost reductions undertaken limit the negative consequences
considerably and the result in September was positive. The order inflow in
September of NOK 207 million was the strongest since November 2008.
The product composition is gradually expected to improve and the group is
expecting the order inflow to increase. This is expected to have a positive
affect on the result in 2011.
Within the Steel business area the steel and machinery segment has a
satisfactory demand, but at reduced prices. The segment also gives considerably
lower value added for Scana than the marine and energy segment. The demand
within the marine market segment remains weak, but Scana has strengthened its
position considerably in relation to world-leading customers, and expects the
effect of this to be felt when the market turns. Scana won new contracts for
special steel to the oil industry in the third quarter. The energy market is
otherwise characterised by low activity and reduced prices.
Within the Marine business area, Scana entered into key contracts for the supply
of gears, propeller equipment and remote control systems to projects in Brazil,
China and Norway in the third quarter. The business area has reduced activity in
relation to 2009, but is delivering good results as a result of cost
adjustments. The level of activity within service and after sales services is
good, and the tendering activity in new sales has increased.
The Oil and Gas business area continues to be characterised by Scana having few
large projects. Activities related to sales, tendering and negotiations have
taken longer than expected, but the prospect is increasing and several projects
are now in the decision phase. Payments from these are crucial to the profit
performance within the business area.
Net financial items were NOK 8 million in the third quarter as a result of
temporary changes in value of currency contracts and an increase in value in
relation to shares.
The net order inflow was NOK 363 million in the third quarter. The tendering
activity has increased in all of Scana's market segments since the corresponding
period last year.
The closing price for shares in Scana was NOK 6.50 at the end of the third
quarter, down from NOK 7.90 at the end of the second quarter. This gives a
market value for the group of NOK 1.1 billion. In the third quarter, 4.1 million
shares out of a total of 167 million outstanding shares were traded. Scana's
holding of own shares is 113,010. Scana has a Market Maker agreement in order to
increase the liquidity of its shares and ensure listing on the Oslo Børs Match
list.
Steel
Operating revenue totalled NOK 250 million in the third quarter. The operating
result was NOK -16 million, which corresponds to an operating margin of -6%. The
result is characterised by both summer closure with heavy maintenance in the
steel companies, and unfavourable product composition from orders which have
lower margins. The underlying operation in this business area has improved
compared to 1(st) half 2010.
In addition, there is also a negative effect on the result in the form of NOK 5
million on Scana Steel Stavanger's part, as a result of extraordinary high
electricity costs related to the flow of water in the Jørpeland Kraft plant.
This agreement will expire in connection with start up of the new power station
in December 2010.
Scana won key contracts in the third quarter within the marine and energy market
segments. This applies to both high alloy materials for demanding oil wells and
deliveries for mooring systems to the oil industry.
The gradual improvement in product composition with a higher refinement ratio,
will affect the result in 2011.
The steel companies' cost-saving measures and ongoing work to streamline
processes are positioning Scana for growth and a positive profit performance
when customers within the energy and marine segments start to increase their
activity again.
The business area's net order inflow was NOK 233 million for the third quarter.
The order reserve was NOK 440 million.
Marine
Operating revenue totalled NOK 122 million in the third quarter. The operating
profit was NOK 13 million, which corresponds to an operating margin of 10%. The
reduction in operating revenue from 2009 is due to lower activity. The high
operating margin is due to cost adjustments and the positive contribution from
the activity within service and after sales services.
Scana has entered into key contracts for the supply of gear and propeller
equipment for tugboats for building in Brazil. Scana has also signed contracts
for propeller, gear and remote control systems for two fishing vessels and four
standby vessels to Norway and China.
Both planned cost reduction activities and those already effectuated will
strengthen Scanas competitive position.
The lack of new ship contracts on a global basis since 2008 has reduced Scana's
activity within the marine segment and the workforce and cost level have been
adapted to the level of activity.
The number of contracts globally has increased in recent months. This will
contribute to a satisfactory level of activity for Scana in 2011.
The cost-reducing measures that have been and will be implemented are
strengthening Scana's competitive position.
The order inflow was NOK 103 million in the third quarter, and the order reserve
is NOK
268 million.
Oil & Gas
The operating revenue was NOK 39 million in the third quarter and the operating
result is
NOK -11 million. The poor result is due to the continued low level of activity
within service and maintenance, and the fact that Scana still has few major
projects. In addition, activities related to sales, tendering and negotiations
have been carried out under a revised schedule.
Scana is currently producing risers and connectors to the Snorre field in the
North Sea. The field is operated by Statoil, and Scana expects to win similar
contracts for other regions in the coming months.
In the short term, the oil spill in the Gulf of Mexico is leading to lower
activity for Scana's operation in Houston. In the long term, however, this
accident is expected to result in changes in the rules that can strengthen
Scana's opportunities in the area.
Profitability within Oil & Gas has not been satisfactory. Initiatives will be
effectuated to improve the situation.
The order inflow was NOK 27 million for the business area in the third quarter,
while the order reserve is NOK 109 million.
Accounts
This interim report has been prepared in accordance with the standard for
interim financial reporting, IAS 34 and IFRS. The same accounting principles are
applied in the quarterly report as in the annual accounts.
Financial performance
The group's total turnover was NOK 397 million in the third quarter. The
reduction from the same period in 2009 is attributed to less activity,
considerable price pressure, a weaker Euro, and less optimal product composition
in the steel companies in relation to the previous year. The operating result
was NOK -23 million. Net financial items totalled NOK 8 million, compared with
NOK 46 million in the third quarter of 2009. Temporary changes in value linked
to currency contracts represent a gain of NOK 2 million. In addition, the value
of shares has increased by NOK 9 million in the third quarter. Scana hedges all
major contracts in foreign currency. The change in value must be entered
directly in the profit and loss account against finance in accordance with IFRS,
but cannot be realised and has no effect on liquidity.
The estimated tax for the third quarter is NOK -3 million, which is 22% of the
result before tax. Scana's tax loss carry forward is used to reduce the tax
payable.
Financial instruments are valued at fair value. Changes in value that satisfy
requirements for hedge accounting are recorded against the total comprehensive
income. In the third quarter, such instruments had a neutral development.
Hedging of the net investment and translation differences from foreign
subsidiaries have changed the result after tax by a total of NOK -20 million.
The earnings per share was NOK -0.05 for the third quarter 2010.
Cash flow
Net cash flow from operational activities was NOK 17 million in the third
quarter, of which the reduction in working capital totalled NOK 14 million.
Net investment in fixed assets were NOK 23 million. In addition NOK 50 million
are invested in shares and paid-in capital.
Net cash flow from financing activities is NOK 8 million. During the period,
long-term debt increased by NOK 20 million. Short-term debt was reduced by NOK
10 million and other financing activities total NOK 2 million.
The net cash flow in the third quarter was accordingly NOK -47 million. The
group's cash and cash equivalents totalled NOK 128 million at the end of the
third quarter. In addition, the group has a satisfactory level of unused credit
facilities.
Balance sheet and capital position
Scana has a healthy financial position, with a low level of debt. The debt ratio
is 0.7. The total balance sheet at the end of the third quarter 2010 was NOK
1,945 million; a reduction of NOK 44 million from the same period in 2009. The
group's net interest-bearing debt was NOK 414 million. Book equity of NOK 804
million corresponds to NOK 4.79 per share and an equity ratio of 41%.
Outlook
Scana's main products are niche oriented, and they are leading products within
their market segments. After several years of turnover growth and higher
margins, this trend was reversed in 2009 due to a significantly weaker
international economy.
The energy market segment is expected to show a positive development for Scana
in 2011 and an increase in contracts globally is also expected to have an effect
on the marine segment in 2011. Volumes in the steel and machinery market are
expected to be satisfactory, but prices will remain at a lower level.
The products Scana supplies within the Steel business area have a very high
steel grade.
Deliveries to customers within steel and machinery have a high level of
activity, but are characterised by strong price pressure and give a low added
value for Scana. The company only enters into short-term contracts because
flexibility is required to meet the increased activity within the energy and
marine segments. This production gives a considerably higher added value. Within
the marine segment demand is expected to be low until 2011. Deliveries from
Scana's steel companies to the marine segment are expected to increase gradually
in 2011. Scana has spent 2010 strengthening its position with world-leading
customers. An increase in the degree of completion and more complete project
responsibility for Scana is expected to have an effect on both the customers and
Scana when the markets turn.
The low number of new contracts globally has resulted in a gradual reduction in
activity in the Marine business area, but cost adjustments have safeguarded good
results. Scana has strengthened the sales and marketing work, is strengthening
its positions in emerging markets, and has succeeded in winning key contracts in
the third quarter. The increase in contracts in 2010 can give a somewhat higher
level of activity in the marine companies in 2011 than previously estimated. The
focus on service and after sales services in recent years has increased turnover
and had a positive effect on the result. Scana expects this development to
continue. In addition, Scana will strengthen product management and optimise
production within the Marine business area.
Scana has developed several advanced products and systems in the Oil & Gas area
in recent years that have created interest among leading international players.
Multi-disciplinary training, leading expertise within materials technology and
the capability for in-house production of special components mean substantial
future potential. The order inflow is expected to increase towards the end of
2010 as a result of greater focus on risers and subsea components in the world's
most active oil and gas markets. The founding of Scana Subsea will simplify the
customers' business processes linked to specialised equipment, and provide Scana
with considerable business opportunities on a global basis. An upturn is
expected in the FPSO market towards 2013. Scana is dependent on major projects
to achieve a satisfactory result in this business area.
Scana has implemented extensive measures to adapt its capacity and consumption
of resources to a lower demand and reduced prices. Scana has also released
working capital and introduced a strict prioritisation of its assets and
investment resources. This enables the group to ensure a satisfactory level of
liquidity and a healthy balance sheet.
In addition to focussing on an optimal daily operation, Scana is also working on
strategic measures to strengthen the group's size and value creation. This
includes the purchase of 9.9% of the shares in TTS Group ASA. Further business
opportunities are being discussed with TTS Group and clarification is expected
before the end of the year.
Scana is considering selling assets that are not deemed to be included in the
core activity in order to increase the financial latitude and to increase the
focus on the part of the business that adds most value. In the work for future
growth and value development Scana's board has decided to engage an external
advisor. Scana's board has decided to engage an M&A corporate advisor to
facilitate the work with creating future growth and shareholder value.
Stavanger, 20(th) October 2010
This information is subject of the disclosure requirements acc. to §5-12 vphl
(Norwegian Securities Trading Act)
[HUG#1453612]