Red ink for Kvaerner as coronavirus costs bite

Affected by coronavirus costs and provisions, Norwegian offshore engineering and construction services company Kvaerner sank to a loss in the first quarter of the year compared to a profit in the year-before quarter.

For the first quarter this year, Kvaerner’s revenues were NOK 2.13 billion ($200.4 Mn). This compares to revenues of NOK 2.12 billion ($199.5Mn) in 1Q 2019.

Kvaerner recorded a loss of NOK 123 million ($11.6Mn) in the first quarter this year, compared to a profit of NOK 54 million ($5.08Mn) in the same period last year.

The company’s results in this year’s quarter were negatively influenced by costs and a provision related to coronavirus mitigation of NOK 101 million ($9.5Mn).

Kvaerner said that, until the uncertainty related to availability and extra costs for projects resources is concluded, margin recognition is temporarily reduced for some projects.

In total, these elements have contributed to a negative impact on the EBITDA for the Field Development segment of NOK 192 million for the first quarter of 2020.

The order intake was NOK 1.204 billion during the first quarter of 2020, mainly related to growth in existing projects and some new work for prospects in early phases.

The order backlog ended at NOK 7.2 billion.

One year ago, order intake was NOK 1.69 billion and order backlog was NOK 10.2 billion.

Kvaerner has already taken actions to reduce its costs as a response to challenges in the market environment.

The company’s measures included not paying dividends and a zero increase in the compensation to the company’s directors. In addition, Kvaerner CEO proposed a 10% reduction to his annual base salary.

Karl-Petter Løken, Kvaerner’s President & CEO, said: “The market for new projects is this spring influenced by international and national virus protection measures, and also by how such measures reduce global activity for a period.

“With some new projects being delayed, we have taken actions to reduce costs, including about 225 employees placed on temporary leave.

“We do see some key prospects which we are currently actively positioning for. The largest share of such opportunities in 2020 is within renewable businesses and within onshore process industries”.