November 6, 2002

Aker Kvaerner shipyards earn $13.3 million in Q3

The shipbuilding business area of what is now the Aker Kvaerner group reported NOK 95 million (approx $13.3 million) in earnings before interest, tax and amoritization (EBITA) in the third quarter, adding up to NOK 418 million for the first nine months. As expected, profits declined significantly in the third quarter due to reduced workload and utilization at the yards as one container vessels, one cruise ship and one yacht hotel were delivered in the period.

For the group as a whole, despite continued slow markets, ordinary earnings before interest, tax and amortization reached NOK 254 million in the third quarter [$1=NOK 7.136 at today's rate]. The financial position was further strengthened:Net interest-bearing liabilities were reduced to NOK 166 million while cash and short-term interest-bearing receivables rose to NOK 4.6 billion.

Ordinary trading earnings before interest, tax and amortisation (EBITA) for the first nine months this year were NOK 748 million compared with losses of NOK 57 million in the same period last year. In the third quarter, operating profits (EBIT) were NOK 169 million and year to date totaled NOK 429 million, after special charges and sales gains that amounted to a loss of NOK 107 million year to date. The group reported an operating loss of NOK 2.5 billion in the first nine months last year after recognizing NOK 2.3 billion in exceptional charges.

Yard EBITA (NOK million)

3Q01 4Q01 1Q02 2Q02 3Q02 2001 2002 2001
Kvaerner Masa-Yards 44 154 138 198 165 203 501 357
Kvaerner Warnow 19 -80 21 7 -15 33 13 -47
Kvaerner Philadelphia -87 -82 -22 -19 -55 -143 -96 -225

The group reports that revenues in the Shipbuilding business area declined in the third quarter as several newbuilds were delivered from its yards. Kvaerner Masa-Yards completed one cruise vessel, while Kvaerner Warnow delivered two container vessels.

The strong financial performance at Kvaerner Masa-Yards continued in the third quarter, while both Kvaerner Warnow and Kvaerner Philadelphia reported operating losses. The Philadelphia yard has reduced its productivity estimates for the first container vessel now being built, resulting in additional provisions being made to cover the cost.

In September a joint management team was established for the German shipyards Kvaerner Warnow Werft and Aker MTW. One month later, Aker Kvaerner and Aker RGI agreed to take the close co-operation one step further.

The NOK 500 million penalty repayment from the European Commission to Kvaerner Warnow was received in the second quarter. The European Commission has appealed the ruling. Pending a further assessment of the basis for the appeal, Aker Kvaerner has not recognized the repayment as income.

According to this agreement, which is subject to due diligence and approval from Aker Kvaerner's and Aker RGI's lenders, Aker Kvaerner will own 40 per cent of the com-bined yards. The aim is to establish the new ownership by the end of 2002. The transac-tion will have no effect on the results for Aker Kvaerner. All outstanding issues be-tween Aker Kvaerner and the European Commission concerning subsidies will re-main with Aker Kvaerner after the combina-tion.

The contract for delivery of two container vessels from Kvaerner Philadelphia and Kvaerner Masa-Yards' letter of intent for delivery of a cruise ferry have not been in-cluded in the order reserve. The value of these potential orders amounts to NOK 3.6 billion. In a separate release, Kvaerner Masa-Yards notes that its operating revenues for the January - September period were EUR 781.4 million (MNOK 5942). At the end of September, the unrecognized sales value of the orderbook was EUR 898 million.

Kvaerner Masa-Yards says its financial results for the period January - September 2002 were satisfactory. Partially contributing to the results were the proceedings from the company's Improvement Program, which was completed in the end of August 2002 and slightly exceeding the overall targeted cost improvements. 

"We have all reason to be satisfied with our profit performance for the first nine months of year 2002," commented Jorma Eloranta, President and CEO of Kvaerner Masa-Yards. "The achieved results reflect Kvaerner Masa-Yards competitiveness, and more widely, also the capability of the Finnish shipbuilding sector."

Looking forward, he noted that the challenging market situation in the global shipbuilding sector continues. "In addition to cruise ships and cruise ferries, our marketing focus is on LNG carriers, icebreakers and some other specialised vessels, where a number of newbuilding projects are under discussion. Also other type of contract manufacturing possibilities are looked into. It is however evident that Kvaerner Masa-Yards will have to operate at reduced production levels in 2003 and therefore we have now started various necessary actions for adjusting the capacity."

The current Masa-Yards newbuilding orderbook includes four cruise ships. Lower capacity utilization and cost adaptions towards the end of the year will significantly reduce the profit level in the fourth quarter.

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