Technip 3Q update from Thierry Pilenko, Chairman and CEO:
“A robust operational performance associated with strong cost reduction measures enabled Technip to record a solid third quarter including an adjusted margin on recurring operations nearing 10%. In addition, we have made considerable progress towards our merger with FMC Technologies passing major regulatory milestones. Last, we recorded a first project win for our alliance.
In Subsea, we started handover to clients on a range of projects, including T.E.N. in Ghana ahead of schedule. Vessel utilization remained strong at 86% reflecting efficient management of our high-end fleet, including in Brazil where we have 5 vessels on charter. We continued to be busy also across our flexible manufacturing plants. In Onshore/Offshore, on the Yamal project, we completed the sail away of all 78 modules planned for the first phase of the project, and their delivery on the Sabetta site in Siberia is ahead of schedule. Mobilisation on site has also been impressive this year, with over 10,000 people now active on the site construction and hook-up.
Our cost reduction efforts continued as planned and enabled us to sustain our adjusted group margins at 9.7% (compared to 9.4% last year) despite revenues being down 6.1% year-on-year.
Technip's adjusted OIFRA was therefore €285 million compared to €260 million in the second quarter and €292 million a year ago. Net income rose 12.4% to €184 million.
Our cash-flow showed the expected outflow of working capital as we applied contract advances to project progress but net cash was resilient at €1.8 billion.
Order intake was in line with last quarters, with nearly €0.5 billion in Subsea and €1 billion in Onshore/Offshore, with the Greater Enfield and Jebel Ali projects being the most important awards.
Our teams are busy tendering on new projects, even if the picture is varied across geographic regions.
Onshore/Offshore remains quite robust and we continue to see opportunities to get involved early with customers, positioning ourselves for future projects. The resilience of this segment is underpinned by our long-lasting client relationships, our front-end presence and our proprietary technology. We continue to be well positioned on a number of promising early stage Onshore/Offshore projects.
In Subsea, we are seeing pockets of growing demand, for example greenfield in the North Sea, and sustained interest for long tiebacks and field extensions. Also, our clients continue to work with us on securing structural cost reduction in offshore developments. This interest has accelerated over last six months through our Technip / FMC Technologies Alliance, with 17 integrated early stage studies at the Forsys Subsea joint venture and our first follow-on business - a fast track development of the Lancaster field in the North Sea.
Overall, we remain confident in our ability to drive change in our industry and therefore to enable our clients to make new offshore investments on a profitable basis, even in a low oil price environment.
Turning to our full year 2016 objectives, our Subsea guidance is upgraded with adjusted revenues expected above €5 billion and adjusted OIFRA around €700 million, while our Onshore/Offshore guidance remains unchanged in every respect.
We expect to enter 2017 with a good backlog and promising prospects, and intend to continue to drive out costs down and focus on solid project execution. Based on these elements, we would expect for 2017: Subsea to deliver roughly stable adjusted margins on lower adjusted revenues; Onshore/Offshore to deliver rising adjusted profit and adjusted margins on slightly lower revenues.
Merger with FMC Technologies
A number of important milestones have been reached over the last three months. Along with obtaining anti-trust in most countries, we have foreign investment approval both in the US and France. The necessary regulatory fillings have also been validated.
As a result, we confirm that both companies will hold their shareholders' meetings on December 5, 2016. This would enable our merger to close in January, earlier than originally planned.
To conclude, Technip’s teams have shown their ability in the third quarter to capitalize on the backlog to deliver solid revenue and profit, even in the current downturn of our industry. We have retained a robust, liquid balance sheet. Based on our proven model, we are proving capable of winning diversified and integrated new projects. Last, we are taking further our strategy to create a broad based oilfield services company through the merger with FMC Technologies, which will create the third largest company in our sector, well placed to create substantial value for all our stakeholders.”