London-based oilfield contractor Acergy S.A. (ACGY) reported better-than-expected first-quarter (ending Feb 28, 2010) results on the back of solid margins, strong operational performance, and good project execution skills. Solid activity levels in West Africa. Good contribution from joint ventures also helped. Earnings per share from continuing operations came in at 23 cents, ahead of the Zacks Consensus Estimate of 20 cents and the prior-year profit of 19 cents.
Revenue & Operating Performance
Revenue for the quarter increased 14.5% year-over-year to $575.8 million, primarily due to robust exploration and production activity levels in West Africa and Asia Pacific, partially offset by weak contributions from the North Sea and Brazil. The sales figure easily beat the Zacks Consensus of $550 million. Compared to the first quarter of 2009, gross profit was up 28%, reflecting good project execution, particularly in West Africa and Asia Pacific.
Operating income from continuing operations was up 41% year-over-year, mainly due to good operational performance and higher contribution from associates and joint ventures, partly offset by increase in administrative expenses. Adjusted EBITDA from continuing operations for the quarter was $135.2 million, up nearly 33% year-over-year, while EBITDA margin was 23.5%, an increase of 330 basis points.
Backlog
Acergy’s order backlog, as of Feb 28, 2010, stood at $2.5 billion, down from $2.8 billion in the previous quarter but up from the prior-year quarter’s level of $2.4 billion. The sequential decline reflects a relatively low order intake in the quarter. Of the $2.5 billion total backlog position, $1.3 billion is likely to be executed in fiscal year 2010.
Capital Expenditure & Balance Sheet
Acergy’s capital expenditures for the quarter were $151.8 million. At the end of Feb 2010, the company had cash on hand of $667.1 million, down from $907.6 million in the prior quarter.
Outlook
Management indicated that the medium-term business environment has improved with a stronger oil price (importantly with lower volatility) and more stable macro environment.
The company anticipates more activity in the conventional West African market in the near-to-medium term, that too at good margins. Another encouraging sign for Acergy is the positive sentiment towards shorter-term work in the U.K. North Sea, where pricing environment remains very competitive.
In particular, Acergy is encouraged that some of the company’s relatively high-margin Sub-sea construction, Umbilicals, Risers, and Flowlines (SURF) activities, which were delayed during 2009 due to macroeconomic concerns, are expected to come to market. However, given the size and complexity of these new major SURF projects, offshore installation is not expected to commence before 2011.
Acergy expects revenue for fiscal year 2010 to be in line with 2009, while EBITDA margin is likely to be slightly lower.
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