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Technip shares surge on record order backlog

BY TARA PATEL

PARIS (Bloomberg) -- Technip SA surged in Paris trading after raising the dividend and reporting a record order backlog even as Europe’s largest oilfield-services provider said spending growth by oil companies is slowing.

Technip shares climbed as much as 8.8 percent, the most since May 2010, and were trading 7.9 percent higher at 69.26 euros at 11:48 a.m. in Paris. It was the best performer on the STOXX Europe 600 Index.

“Technip strongly believes that its record-high backlog is profitable,” Kepler Cheuvreux analyst Geoffroy Stern wrote in a note, calling the payout a “nice surprise.”

The order intake rose 7.1 percent in the fourth quarter from a year earlier, boosting the contract backlog to 16.6 billion euros ($22.7 billion), it said in an earnings statement. The company recommended raising the dividend by 10 percent to 1.85 euros. The shares have declined 20 percent in six months amid slowing capital expenditure by customers.

“Our clients’ capex continues to increase globally even if at a more moderate rate than in the past decade,” CEO Thierry Pilenko said in today’s statement. Capex growth among major oil companies may be 5 to 6 percent compared with double-digit growth in previous years, he said. He cited depleting older reserves, shale energy in the U.S. and new discoveries as areas for future activity.

Technip supplies equipment to oil and natural gas producers to develop offshore fields and onshore plants such as refineries and chemical factories. Total SA, Royal Dutch Shell Plc and Chevron Corp. are among clients that plan to rein in spending as oil prices stagnate and costs rise.

Net income declined to 134.5 million euros in the fourth quarter from a restated 148 million euros a year earlier, the Paris-based company said. That missed the 138 million-euro average of 13 analyst estimates compiled by Bloomberg.

Operating margins in the subsea division fell to 13.5 percent in the quarter from 14.9 percent a year earlier. Margins have been squeezed by longer vessel maintenance and costs from starting a new plant in Brazil.

The subsea margin will be at least 12 percent in 2014 and 15 percent to 17 percent in 2015, according to Technip. Subsea revenue will grow to 4.35 billion to 4.75 billion euros this year and more than 5 billion in 2015, the company said.

Technip reiterated guidance given in December that the subsea margin will be “exceptionally low” at about 5 percent in the first quarter of this year.

Technip has won orders for offshore projects in Brazil, Dubai and Norway since the start of this year.

Technip’s spending is expected to decline this year, while mergers and acquisitions are “not on our mind,” CFO Julian Waldron said on a conference call.

02/20/2014

 

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