3rd Quarter & 9 Mths Results

RNS Number:2710M
Kvaerner ASA
29 October 2001


Kvaerner reports third quarter results

LONDON, 29 OCTOBER 2001: Kvaerner, the Anglo-Norwegian engineering and
construction Group, today announced its results for the nine months to 30
September 2001.  The third quarter result was heavily affected by the need to
make substantial new provisions in the operating divisions, together with
write-downs in the book values of certain investments and financial assets.  

The operating loss before exceptional items for the nine-months to 30
September 2001, was NOK 613 million, resulting in a nine-months year-to-date
operating loss of NOK 182 million.  Including exceptional items, the operating
loss for the third quarter was NOK 2,923 million, producing a nine months
operating loss of NOK 2,492 million (2000: a profit of NOK 772 million,
including net exceptional gains of NOK 200 million and adjusted for activities
sold).  After net financial items of NOK 142 million and a write-down of
financial investments of NOK 1,221 million in the quarter, the loss before tax
was NOK 4,286 million (2000: profit of NOK 159 million, adjusted for
activities sold). The nine-months year-to-date net financial items were
negative at NOK 368 million (2000: negative at NOK 585 million), and the
result before tax for the nine months, including a write-down of financial
investments of NOK 1,221 million, was a loss of NOK 4,081 million (2000: NOK
187 million, adjusted for activities sold).  Group turnover in the third
quarter was NOK 11.4 billion, producing a nine-months year-to-date figure of
NOK 33.0 billion.  (2000: NOK 32.2 billion, adjusted for activities sold.)

Provisions
In July, the Group warned that the E&C results would not meet expectations and
it took a NOK 100 million provision in the second quarter accounts.  This
action reflected the problems connected to the completion of the Tosco
project, and a dispute with Cal Energy over a project in California.  The
situation on the Tosco project has deteriorated severely throughout the
quarter, and a detailed reassessment of all operational and contractual issues
surrounding these two projects have led to the conclusion that a further NOK
390 million provision is prudent.  Furthermore, it has been decided to make a
NOK 50 million provision in the third quarter accounts to meet a deterioration
on other contract issues within E&C.   A provision of NOK 117 million has also
been made to meet expected losses in connection with the buyout of an
insurance claim.  The results of Pulp & Paper also deteriorated during the
quarter.  A NOK 85 million provision was made in the third quarter accounts
for a negative development on a contract under completion in Australia.
Finally, a NOK 37 million provision was made in the Philadelphia Shipyard
accounts reflecting the fact that the costs for the first ship to be built are
now expected to be higher that the obtainable value - in the current market.

Revaluation of assets and other financial investments
In a comprehensive re-assessment of the book value of assets and other
financial investments and exposures, the following amendments were deemed to
be prudent:

- NOK 374 million provision against assets held at the shipyard in
Philadelphia, which is equal to the book value of the yard.  The write-down
has been made following weak result forecasts for the business - due to
unexpected problems in raising yard productivity to the expected level, as
well as weakening prospects of a sale in the present economic climate. 
- A NOK 82 million provision against the value of the fixed assets in the
Romanian operations. 
- A NOK 1,600 million write-down of the UK pension fund, due to an estimated
decrease in the value of the equity investments of the fund, amounting to NOK
3.2 billion.
- A NOK 1,035 million write-down of the book value of the investment in the
Sea Launch venture after a revised net present value of the cash flow,
following a new evaluation of expected income potential.
- A NOK 186 million write-down has been made in the book value of two further
investments (Greenfield and Jo Sypress).
- Finally, a NOK 254 million provision was made to cover certain other
exposures.  These included the assumed financial consequences of the negative
outcome of an arbitration related to a dispute concerning a contract which
Pulp & Paper completed in Asia in 1998, together with a number of asbestos
claims having been served on the Company in the United States of America. 
 
Underlying performance
The underlying performance of the operations showed a very mixed picture.  Oil
& Gas showed further progress in the third quarter and proves to have a robust
business platform despite the current global unrest.  Progress was shown
across all major lines of business in this area.

In the E&C business area execution and completion problems attached to a
number of projects depressed the operating results.  The problems revealed on
these projects, give evidence that a tighter execution control policy and
practice is needed.  The Power sector in the USA continues its positive
development, and the outlook for this segment is still encouraging. 

In the Pulp & Paper business area, the Fiberline division showed good results
and a very satisfactory profit margin.  The good performance in this division
was offset by a considerable loss on a project in the Chemetics division.

Among the three yards, the Masa-Yards continued its steady performance, again
providing proof of the sustainable positive effects of the improvement
programme.  The Warnow yard completed and delivered the drilling rig Stena
Don.  The Yard can now turn its attention to the ongoing construction of
container vessels.

Order intake and reserve
Order intake in the third quarter remained strong, particularly for E&C and
Oil & Gas.  The order intake of the Group for the nine first months of the
year amounted to NOK 27.2 billion, of which NOK 11.6 billion was booked in the
third quarter.  The combined nine-months order intake for E&C and Oil & Gas
was NOK 22.8 billion (2000: NOK 23.3 billion), of which NOK 10.6 billion was
booked in the third quarter (2000: NOK 6.4 billion).  The order reserve at the
end of the third quarter amounted to NOK 42.6 billion, against NOK 42.9
billion at the end of the preceding quarter and NOK 51.1 billion at the end of
2000.  Compared to the end of last year, the decline is mainly attributable to
the working off of the high order reserve at Kvaerner Masa-Yards.  The
combined order reserve for E&C and Oil & Gas was NOK 22.8 billion,
corresponding to an increase of almost NOK 2 billion compared to the end of
the preceding quarter.

Kvaerner's liquidity
A separate announcement concerning Kvaerner's liquidity position will be made
later today.


For more information:  
Trond Andresen, Senior Vice President, Group Communications: +44 (0)7770
856550 or Paul Emberley, Vice President Group Communications: [phone]
1035 or  [phone].    


Notes to editors:
- Kvaerner is a world-class Anglo-Norwegian engineering and construction
group. The Group's activities are organised in two core business areas: E&C
(engineering and construction), and Oil & Gas.  It also has interests in
shipbuilding and the provision of services to the pulping industry.  Kvaerner
is a Norwegian registered business, but has a London, UK-based international
headquarters.  The Group has annual revenues of more than US$6 billion, with
some 35,000 permanent staff located in almost 35 countries throughout Europe,
Africa, Asia and the Americas.