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Share 2016-09-29 13:40 RATOS B 40.60 SEK

Aibel

Operations

Aibel is a leading Norwegian supplier of maintenance (MMO) and upgrading services (Modification) for production platforms and onshore installations for oil and gas as well as new construction projects in the oil, gas (Field Development) and renewable energy (Offshore Wind) sectors.

Operations cover the entire value chain from planning, design and development to construction and installation.The company has operations along the entire Norwegian coast including a yard in Haugesund, an engineering office in Singapore and a yard in Thailand. Customers are primarily the major oil companies that are active on the Norwegian continental shelf, but Aibel also has international commissions.

Aibel has approximately 4,000 employees who are, depending on the workload, supplemented with subcontractors and consultants.

Market

Aibel is one of the largest players on the Norwegian continental shelf in maintenance and upgrading services. Competitors include Aker Solutions, Apply Sørco and Wood Group. In the Field Development business area, competitors are multinational companies and Asian yards.

A decline in demand for maintenance and upgrading services and a severe market downturn has been triggered by the oil companies’ declining investment levels and intense focus on cash flow and costs. How-ever, maintenance is inevitable for effective oil production, and the assessment is that many projects have been postponed, resulting in a temporarily lower activity level. Growth in maintenance and upgrading services for oil-producing platforms shows limited direct dependence on the current price of oil over time.

Demand within new construction can vary considerably year to year depending on when individual large-scale projects are initiated and delivered, and has a clearer direct correlation to the current price of oil. Consequently, seen from a global perspective, market activities were extremely low in 2015. At the same time, the large-scale Johan Sverdrup expansion and the many new contracts related to it had a favourable effect on the situation on the Norwegian continental shelf.

The year in brief

Aibel landed two new construction contracts for the Johan Sverdrup field worth some NOK 8.6bn for delivery during the 2015–2018 period, and a six-year framework agreement for the supply of maintenance and modification services to Statoil, valued at an estimated NOK 7.5bn. In addition, the company secured several medium-sized projects, including the modification project Maria worth NOK 860m and a framework agreement with a new customer, Centrica Energy Norway for a potential field development project on the Norwegian shelf. Aibel has also maintained an extremely high level of delivery in terms of its project portfolio.

A lacklustre market trend and low MMO and Modification activity levels had a negative impact on sales. Focus has therefore been on adapting, in close dialogue with customers, the organisation and costs to the current level. The earnings increase is mainly driven by several successful MMO and Modification projects and earlier restructuring measures.

Sustainability

Aibel’s top sustainability issues are health, safety and environment (HSE) as well as anti-corruption, which have high priority throughout the industry. The company has a well-developed approach integrated in the operating activities with systems and processes to monitor compliance and ensure continuous improvement. In 2016, the company will work to clarify its position and efforts regarding environmental and climate issues. 

Development potential

Aibel has a strong market position based on the company’s integrated business model which covers the entire value chain, a combination of Norwegian and Asian resources, and strong customer relationships. The past years’ market slump has placed more severe demands on the sector as whole to cut costs and streamline. Aibel responded with extensive measures to guarantee that customer expectations were met and to be competitive. High delivery capacity and quality has strengthened the company’s market position.

In future, focus will be to continue to improve Aibel’s delivery model to enhance efficiency and competitiveness, ensure high quality in the deliveries of existing project portfolios and win new contracts. Measures designed to improve efficiency and reduce costs have the highest priority as does working close to the company’s customers to improve efficiency throughout the value chain. Aibel is thereby well-equipped to manage the lower market activity that it temporarily faces. We acquired Aibel because the company has a leading position in an attractive market with good long-term growth potential, strong customer relationships and a unique business model. This has not changed and will be significant in the future. 

(Mainly from Ratos's annual report 2015.)