UPDATE 2-Technip shares up after order book rise and dividend increase

Thu Feb 20, 2014 3:52am EST

* Q4 net down 9.1 pct at 134.5 mln eur vs f'cast 143 mln

* Raises 2013 dividend to 1.85 euro/share

* Order intake rises 7.1 pct, FY backlog at 16.58 bln eur

* CEO sees intl oil co capex growing 5-6 pct in 2014

* Shares rise more than 5 pct (Recasts, adds details, analyst comment, shares)

By Michel Rose

PARIS, Feb 20 (Reuters) - French oil services group Technip posted a rising order backlog and said it planned to sharply raise its dividend, easing concerns about spending cuts by its oil company clients and boosting its shares.

The stock was up 5.8 percent at 67.92 euros by 0822 GMT, among the biggest gainers in the CAC 40 index of blue chip French stocks.

Shares in Technip, which supplies pipes, platforms and equipment to energy producers, had fallen almost 8 percent since Jan. 1, following a 19 percent decline in 2013, on fears its oil and gas majors clients would rein in exploration spending after years of large investments spurred by high oil prices.

Technip last October cut its full-year sales and margin targets for its subsea business, hit by factors including a fall in currencies such as the Brazilian real against the euro, and Chief Executive Thierry Pilenko said he saw stricter "discipline" from oil major clients in terms of capital expenditure.

Yet the company said on Thursday its order intake rose 7.1 percent in the fourth quarter to give a backlog of 16.58 billion euros, of which 8.6 billion is in its subsea business.

The group also said it would raise its 2013 dividend by 10 percent to 1.85 euros per share and reported a net cash position of 663 million euros.

Pilenko retained a relatively cautious stance, telling reporters on a conference call: "In the previous decade, majors and super majors had double-digit growth rates, and at the moment we're more on a 5 to 6 percent growth rate."

But he added: "The average in the industry could be slightly higher thanks to national oil companies and independent ones, they remain rather bullish on investments."

Exemplifying Technip's challenges, French oil major Total confirmed earlier this month it would start a "soft landing" in capital expenditure in 2014.

COST INFLATION

Total and other companies have been trying to put a brake on costs which have swollen the bill for major projects in recent years, and Technip said it was working with majors to find cheaper solutions.

"We see a slowdown in overall wage costs, even if we continue to raise salaries in hot spots, areas where demand is the strongest," Pilenko said.

"We are working with clients more and more ahead of projects to see how to optimize costs. That doesn't mean necessarily to cut supply-chain cost by x percent, but rather look at more suited solutions for more complex or smaller fields," he added.

Societe Generale analysts noted three metrics could drive a rally in Technip shares: "a strong order intake in Q4, a much stronger cash position than expected and a higher than expected 2013 dividend."

However they expressed concerns about costs. "We see nothing to ease our concerns on Technip: with around 40,000 employees (at the end of) ... 2013, fixed-cost absorption could prove a key issue for Technip in 2014 and 2015 and limit scope for positive earnings surprises over coming quarters," they wrote in a note.

Technip also reported an operating margin of 8.3 percent in the three months to end-December, 2.1 percentage points below the same period a year ago.

Net profit in the fourth quarter fell 9.1 percent to 134.5 million euros ($185 million), while operating income was down 13.4 percent to 207.2 million on revenue rising 8 percent to 2.48 billion.

Fourth-quarter results were slightly below a Thomson Reuters I/B/E/S consensus of 143 million euros in net profit, 211 million in operating income and 2.50 billion in sales.

The group warned in December that it expected lower operating margins at the unit in 2014, saying it expected at least 12 percent, down from around 14 percent in 2013, before picking up in 2015. ($1 = 0.7271 euros) (Additional reporting by Alexandre Boksenbaum-Granier and Benjamin Mallet; Editing by Andrew Callus and David Holmes)