* Capacity constraints biggest hurdle
* To focus on organic growth
* To return 30-50 pct of profits to shareholders
* Targets EBITDA margin of 15 pct by 2017
By Balazs Koranyi and Henrik Stolen
OSLO, Dec 5 Oil services firm Aker Solutions
expects to continue to grow at a breakneck pace in the
next five years, limited only by its own capacity constraints,
particularly access to engineers.
Riding an offshore exploration boom that shows no sign of
abating, Oslo-based Aker Solutions said on Wednesday it plans to
double revenues by 2017, boost operating margins, expand
capacity and still keep dividend payouts high.
"Our growth rate in almost all business areas is
outperforming market growth, hence we're gaining market share,"
Executive Chairman Oeyvind Eriksen told a capital markets day
"The top challenge is capacity in general and qualified
engineers," he said. "This year, the utilisation of our own
engineering resources has been close to 100 percent and this is
Norway's oil industry expects that demand for engineers will
rise by 40 percent between 2011 and 2016, creating a shortage of
up to 8,000 engineers.
With unemployment at a barely visible 3 percent, the sector
has little hope of filling that gap, so it is importing an
increasing number of workers and moving more work offshore.
Aker Solutions sees annual offshore spending by energy
companies rising by around 10 percent a year over the next five
year as oil companies move to increasingly extreme locations
like the deep waters of Brazil, West Africa, Australia, and the
The firm had hoped to achieve some of its growth through
acquisitions but has scaled back those plans after a deal to buy
Dubai-based NPS Energy fell through this year.
"Most of the growth to date is organic and that trend will
continue, we will reduce the focus on M&A growth," Eriksen said.
Aker solutions sees its EBITDA margin rising to around 15
percent by the end of 2017 from just above 10 percent this year
and plans to continue returning 30 to 50 percent of its earnings
through dividends and buybacks.
Shares in Aker Solutions rose over 5 percent in heavy trade
in response to the firm's new targets, well outperforming a
broadly flat market.
"The targets are solid ... and if they meet them, the stock
should rise considerably," Fredrik Lunde, an analysts at
brokerage Carnegie said. "But it's too early to buy on 2015
The stock is up 57 percent over the past year, well ahead of
key rivals, although the firm still considers this too low.
Aker Solutions is trading at 7.2 times its enterprise value
to EBITDA ratio while oilfield equipment maker Cameron
is at 10.4, FMC Technologies is at 13.6 and Schlumberger
Ltd is at 8.8, the firm said.
"Our ambition is to be priced in line or above the peer
groups," Chief Financial Officer Leif Borge said.
To boost growth, Aker Solutions plans to focus on its
best-performing business segments and will divest non-core
assets to free up capital.
"We've been consuming cash the last couple of years,
investing in the future," Eriksen said. "In the future, we want
a better balance between capital employed and cash generation."
Although Aker Solutions does not plan to scale back any of
its operations to free resources for better-performing
divisions, it predicted more internal competition for cash,
engineers and management resources.