AKVA group reports 4 Q 2009 financial results

The report has made the following highlights:

• Operating revenue in 4Q was 143 MNOK which is 25 % lower than the same period last year. The period's EBITDA showed a loss of 16.1 MNOK.
• EBITDA hit by several items related to projects and accounting adjustments.
• Revenue was affected by restrictive investment policies in the salmon industry in general during 2009.
• Sound order inflow in December and so far in 2010.

In the comments below on the financial accounts, the 2008 figures are presented in parentheses following the 2009 stated values when included.

Operations and profit

Operating revenues in 4Q were 142.9 MNOK (191.8) with an EBITDA -16.1 MNOK (-9.7). Operating revenues for the year 2009 were 599.3 MNOK (866.5) with an EBITDA of -11.5 MNOK (52.7).

The depreciations in 4Q were 7.2 MNOK (9.3). EBIT loss in 4Q was -23.2 MNOK (-19.0). Net financial expenses were MNOK 2.1 MNOK (3.6) Net profit after allowing for taxes of -3.8 MNOK (-4.8) was -21.6 MNOK (17.9).

The depreciation and amortisation for the year amounted to 30.9 MNOK (29.5). The 2009 EBIT was -42.4 MNOK (23.3). Net financial expense was -9.6 MNOK (-12.5). Profit before tax for 2009 was -52.0 MNOK (10.8). Net profit after allowing for taxes of -12.9 MNOK (5.3) was -39.1 MNOK (5.5).

Business volume continued at a low rate in 4Q with correspondingly low underlying earnings. In addition to low business volume the results were severely affected by re-evaluation of projects, accounting adjustments and some other one-off items amounting in total to about 18 MNOK of which around half of it is related to accounting adjustments. The re-evaluation of projects is primarily related to land based recirculation projects where actual costs and cost estimates for the deliveries have increased.

Firm task have been implemented to secure improved project management operationally as well as financially going forward. The same applies regarding procedures on the accounting side.

The sale of the shares in Wavemaster Net Services was made in November. The recorded gain related to the sale was about 7 MNOK.

The announced restructuring plan is advancing according to plan, aiming at reduced operating expenses and improved cost flexibility. As a result of the restructuring implemented during 4Q 2009 the financial reporting will be adapted to the new organisation in future reporting. This implies that the division into the business areas INTECH and OPTECH will be ended. Further details of the new reporting format will be described in the 1Q 2010 report.

Operations Technology (OPTECH)

The operating revenues for OPTECH in 4Q were 93.5 MNOK (96.8). The EBITDA for 4Q was -9.7 MNOK (-5.7). For the year operating revenues were 328.2 MNOK (399.2) with an EBITDA loss of 6.1 MNOK (25.1).

The operations were marked by small business volume throughout the quarter with customer decisions principally aiming at investments and deliveries for 2010. Internally the focus has been on the restructuring program and the measures to achieve lower capacity costs and better cost flexibility going forward.

Infrastructure Technology (INTECH)

The operating revenues in 4Q were 49.4 MNOK (95.0). The EBITDA in the period was -6.4 MNOK (4.0). For 2009 the operating revenues were 271.2 MNOK (467.4) with an EBITDA of -5.5 MNOK (27.7).

Slow pace of deliveries for 2009 in INTECH also as customers were focusing on the investments and deliveries for 2010. However, towards the end of the quarter and the beginning of 2010 there were signs of an improvement going forward.

Balance sheet and cash flow

Working capital in the group balance sheet, defined as non-interest bearing current assets less non-interest bearing current liabilities was 120.0 MNOK down from 127.5 MNOK at the end of 3Q. During 2009 the working capital was reduced by 51.7 MNOK. There is a continuous focus on improving the working capital situation.

Gross interest bearing debt amounted to 198.3 MNOK at the end of 4Q vs. 181.2 MNOK end of 3Q. Cash and unused credit facilities amounted to 76.0 MNOK. Total assets and total equity amounted to 616.5 MNOK and 256.6 MNOK, respectively, resulting in an equity ratio of 41.6% at the end of 2009.

Investments in 2009 amounted to 24.1 MNOK whereof 10.4 MNOK is capitalized R&D expenses in accordance with IFRS.

A new 30 MNOK loan agreement with Innovation Norway was established in the 4Q. The agreement was made in close cooperation with Sandnes Sparebank, the company's main bank and includes also an 18-month period without instalments on all existing long-term loans in Sandnes Sparebank. The reduction in instalments in the period will be about 30 MNOK.

A waiver extending through 2Q 2010 relating to the financial covenants of the major credit facilities and loans was agreed with the company's main bank in 4Q.

Shareholder issues

Earnings per share for 4Q 2009 were -1.25 NOK (-1.04). The calculation is based on 17.222.869 shares average. For 2009 earnings per share were -2.27 (0.32).

Market and future outlook

The general underlying investment demand from the salmon farming industry in Norway and the UK remains relatively strong.

Despite most companies making strong profits, during 2009 they have been focusing on reducing capital investment and working capital. In 4Q the investments through October and November continued at a very low level, however December showed positive shift in order inflow. This development has continued in January and so far in February 2010. The companies now seem to be coming back to a more normalised situation for capital expenditure in the main salmon markets in Norway, UK and Canada.

The challenging fish health situation in the Chilean market has created severe problems for the Chilean salmon industry. The production has been down scaled significantly and the fish health situation now seems to be under control.

The market outlook for recirculation smolt production facilities continue improving and is expected to lead to significant deliveries going forward. New contracts for delivery of such systems have been made both in Chile and Norway during 2010.

The order backlog was 204 MNOK (263) at the end of 4Q 2009, which is a weakening of 59 MNOK compared to the same time in 2008. The decline is mainly related to lower order inflow from the Norwegian market. The strong order inflow in December and January combined with a positive development in the prospect mass confirm a return to a more normalized market demand.