Interim report for 3 rd quarter 2012 Scana Industrier ASA is a Nordic industrial group whose key business is supplying products and system solutions to energy-related businesses. This encompasses oil and gas, other energy and marine activity connected with these areas. Scana also provides servicing, maintenance and repairs for customers in the same markets. Scana s technology, unique expertise in engineering materials and extensive production experience form the basis of the Group s competitiveness. Scana s aim is to be the preferred supplier for leading companies within our market segments. The majority of Scana s customers are located in Europe, America and South East Asia. Scana Industrier ASA has subsidiaries in Norway, Sweden, China, the USA, Poland, Singapore, Brazil and South Korea. The Group s head office is in Stavanger. Restructuring and deferred production Revenue of NOK 399 million in the third quarter of 2012, compared with NOK 449 million in the third quarter of 2011. The deviation is a result of orders already received being postponed from the third quarter to the fourth quarter. EBITDA of NOK -10 million in the third quarter of 2012, compared with NOK +10 million in the third quarter of 2011. Cost-reduction measures are being implemented and non-recurring costs relating to restructuring and increased maintenance had a negative impact on profit of NOK 25 million. Order inflow of NOK 390 million in the third quarter of 2012, compared with NOK 443 million in the third quarter of 2011. Order inflow is influenced by the increased maintenance stoppage at Scana Steel Bjørneborg. Order reserve as at 30 September of NOK 1,234 million, compared with NOK 1,325 at the end of third quarter in 2011. Margins in the order reserve is slightly increasing Profit is in line with the Group s forecast for the quarter. A positive trend is expected for order inflow, revenue and profit over the coming quarters. Key figures Operating revenue EBITDA 800 600 400 200 0 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 30 20 10 0-10 -20 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Order inf low Order reserve 800 1 500 600 400 200 1 000 500 0 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 0 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12
GROUP Financial performance The Group s total revenue was NOK 399 million in the third quarter of 2012, compared with NOK 449 million for the same period in 2011, which is a fall of 11 per cent. The deviation is the result of orders already received being postponed from the third quarter to the fourth quarter. EBITDA was NOK -10 million, which is equivalent to an EBITDA margin of -3 per cent, compared with 2 per cent for the corresponding period in 2011. Profit is in line with the Group s forecast for the quarter. Net order inflow in the third quarter was NOK 390 million, which is a fall of 12 per cent compared with the same period in 2011. The order reserve at the end of the third quarter of 2012 was NOK 1,234 million. Margins in the order reserve is slightly increasing. Cost-reduction measures are being implemented and non-recurring costs relating to restructuring and increased maintenance had a negative impact on profit of NOK 25 million. Net financial items totalled NOK -16 million for the third quarter of 2012, compared with NOK -13 million for the third quarter of 2011. Interest expenses were NOK -7 million and agio items NOK -9 million in the third quarter of 2012. Scana hedges all major contracts in foreign currency. The change in value must be entered directly in the statement of income in accordance with IFRS. The estimated tax for the third quarter is NOK -12 million, which is 24 per cent of the profit before tax. Scana s tax loss carry forward is used to reduce the tax payable. Financial instruments are valued at fair value. Changes in value that satisfy requirements for hedge accounting are recorded against the total comprehensive income. In the third quarter, such instruments fell in value by NOK 7 million. Earnings per share were NOK -0.12 for the third quarter of 2012. Performance of key figures: Quarters Year to date Full Year NOK million Q3 12 Q3 11 Q2 12 Q1 12 Q4 11 2012 2011 2011 Operating revenue 399 449 557 559 613 1 515 1 429 2 042 EBITDA -10 10 22-4 17 8-21 -4 Operating profit EBIT -32-13 3-23 -2-53 -83-85 Operating margin % -8 % -3 % 0 % -4 % 0 % -3 % -6 % -4 % Profit before tax -48-27 -3-35 -14-87 -93-107 Order inflow 390 443 563 520 587 1 473 1 759 2 346 Order reserve 1 234 1 325 1 262 1 272 1 304 1 234 1 325 1 304 Cash flow Net cash flow from operating activities amounted to NOK -29 million in the third quarter. Net cash flow from investing activities was NOK -37 million, of which investment in noncurrent assets represents the main part when considering the quarter as a whole. Net cash flow from financing activities was NOK -42 million. The net cash flow in the third quarter was accordingly NOK -108 million. The Group s total cash and cash equivalents were considered to be adequate.
Balance sheet and capital position Total assets at the end of the third quarter of 2012 were NOK 1,818 million, which is a fall of NOK 88 million compared with the end of 2011. The Group s net interest-bearing debt was NOK 415 million. The carrying amount for equity of NOK 698 million corresponds to NOK 2.43 per share and an equity ratio of 38 per cent. Share price trend The closing price for shares in Scana was NOK 1.52 at the end of the third quarter. This results in a market value of the Group of NOK 438 million as at 30 September. The closing price at the end of the fourth quarter of 2011 was NOK 1.61. In the third quarter, 6.6 million shares out of a total of 287.9 million outstanding shares were traded. So far this year, a total of 24.4 million shares have been traded. Scana s holding of own shares is 113,010. Scana has a Market Maker agreement in order to increase the liquidity of its shares and ensure listing on the Oslo Børs Match list. Restructuring As part of the Group s cost-reduction programme, restructuring is taking place in Poland and China. In total, the number of employees will be reduced by around 130. This restructuring is part of Scana s cost-reduction programme and will take full effect from 2013. Scana is organising its companies into new business areas. This will help to increase value creation within the Group. The corporate structure clarifies a greater focus on the energy market, increases opportunities for synergies between the companies and provides clearer leadership responsibility. The new structure will open up alternative development routes in the different business areas. Recruitment is currently underway for the management positions in the new business areas. BUSINESS AREAS Scana Energy This business area includes Scana Steel Bjørneborg, Scana Steel Søderfors, Scana Subsea, Scana Steel Booforge and Scana Machining, all of which are based in Sweden. Operating revenue amounted to NOK 158 million in the third quarter of 2012. This is a fall of 11 per cent on the corresponding period in 2011. EBITDA for the third quarter was NOK -2 million, which is equivalent to a -1 per cent EBITDA margin, compared with 3 per cent for the corresponding period in 2011. Orders The business area s net order inflow was NOK 163 million for the third quarter. Short delivery times are a feature of the market, which combined with increased maintenance stoppages at Scana Steel Bjørneborg, has resulted in a lower order inflow than normal for the business area. The order reserve totals NOK 431 million compared with NOK 433 million at the same point in 2011. Operations Key parts of the press in Bjørneborg have been replaced during the summer s maintenance stoppage. This resulted in an additional two-week stoppage at the factory, with an impact on profit of around NOK -16 million. The new press is the most vital piece of equipment in the business area and this replacement will increase precision, improve operational efficiency and reduce future risk.
Market Continued low prices in the energy sector, global unrest as a result of the European debt crisis and a strong Swedish krona are putting pressure on margins and profitability within this business area. Low global activity in relation to the contracting of vessels is having a significant impact on the profitability of the business area. Nevertheless, Scana Energy has again increased activity in relation to the marine market. Key customers are also showing expectations of higher activity from 2013 onwards, which is very important for the profit performance within the business area. Global activity levels within oil and gas are high. Scana Energy delivers products such as riser components for field expansions in very deep water, which are demanding projects involving significant development work. Many of these projects are now nearing completion and both the results of the development work and the market in general provide a basis for better profitability for future projects. A high level of orders for riser components is expected in the fourth quarter. A project have been started across the companies within the business area to further strengthen sales work with regard to both new and existing customers. Scana Propulsion Reporting for this area includes the production units of Scana Volda, Scana Mar-El, Scana Zamech (Poland), as well as the service and sales offices in Singapore, Shanghai and Louisiana. Operating revenue amounted to NOK 78 million in the third quarter of 2012. This is a fall of 1 per cent on the corresponding period in 2011. EBITDA for the third quarter was NOK 4 million, which is equivalent to a 6 per cent EBITDA margin, compared with 8 per cent for the corresponding period in 2011. Orders Order inflow was NOK 68 million in the third quarter. The order reserve was NOK 240 million, compared with NOK 187 million at the same point in 2011, which is an increase of 28 per cent. Operations The restructuring of the business in Poland is currently underway. Scana Zamech is being converted to a purely sales and service company, while new production is being transferred to Scana Volda. The number of employees in Poland will be reduced by around 30. The accounts include non-recurring costs for restructuring of NOK 9 million. Market In light of the weak international marine market, Scana Propulsion expects to achieve a satisfactory order inflow in terms of new sales. This is the result of a major focus on offshore and other special vessels. The positive trend within servicing and after-sales services is expected to continue. Scana has commercialised ground-breaking technology through its contract to supply the newly developed propeller system to Kleven Maritime. Ugland Offshore is the end customer for the vessel. The propeller system has two propellers driven by efficient permanent-magnet motors. The propellers rotate independently of one another on the same axle. The propeller system is innovative and provides greater reliability and a
significant improvement in fuel economy. So far, Scana has achieved a strong position in the market for anchor handling vessels. The new concept also gives Scana an exciting foothold in the supply boat market. Scana therefore considers this order to be strategically important. Scana is working on a number of development projects of which it has great expectations. Scana Offshore Reporting for this area includes the companies Scana Offshore Vestby, Scana Steel Stavanger, Scana Offshore Technology, Scana Offshore Services in Houston and Singapore, as well as Scana Skarpenord and Scana Korea Hydraulic. Operating revenue amounted to NOK 131 million in the third quarter of 2012. This is a fall of 11 per cent on the corresponding period in 2011 and is the result of a delayed start to offshore orders. EBITDA for the third quarter was NOK -1 million, which is equivalent to a -1 per cent EBITDA margin, compared with 4 per cent for the corresponding period in 2011. Orders Order inflow was NOK 140 million in the third quarter. The order reserve totals NOK 474 million compared with NOK 586 million at the same point in 2011. The fall in the order reserve is the result of the progress of the Brazil contract, which was entered into in the first quarter of 2011. Operations Scana Steel Stavanger is undergoing reorganisation in light of an increasing number of oil and gas-related project deliveries. This process is demanding, but vital for future profit trends. The company has succeeded in obtaining some very interesting contracts on the international oil and gas market. The company has seen deliveries of high-quality steel to oil wells pick up again throughout the third quarter, while the start of large offshore orders for Samsung Heavy Industry in South Korea has been pushed back from the third quarter to the fourth quarter as a result of the need for further technical clarification. The result for the third quarter was worsened by a negative operating result for Scana Offshore Vestby. Scana Offshore Vestby has increased the number of prospects in terms of loading and unloading systems for the FPSO market and deliveries to the North Sea maintenance market. Increased levels of this kind of delivery are vital to the company achieving profitability. Scana Steel Stavanger is increasing heat treatment capacity for the most highly alloyed products, which are products where the company has a strong competitive edge and profitability. Scana s sales and production of valve control systems are handled by companies in Norway and Korea. These companies are seeing some increase in activity thanks to increased deliveries to FPSO projects in Korea. Market The global oil and gas market is expected to remain positive, which will be reflected in the business area s future profit trends. Scana s companies are still at a restructuring stage, but are approaching profitability. It is particularly interesting for Scana that the FPSO market looks like experiencing positive
development in the future. This is important for profitability at Scana Offshore Vestby and therefore also important to the results of the business area. There is a good level of activity in relation to servicing and repairs in both the North Sea and the Gulf of Mexico and a positive profit trend for Scana Offshore is expected during the fourth quarter. Other companies This report mainly covers the activities of Leshan Scana Machinery in China Operating revenue totalled NOK 33 million in the third quarter. This is a fall of 37 per cent on the corresponding period in 2011. EBITDA for the third quarter was NOK -4 million, which is equivalent to a -12 per cent EBITDA margin, compared with 2 per cent for the corresponding period in 2011. Orders Order inflow was NOK 19 million in the third quarter. The order reserve totals NOK 88 million compared with NOK 119 million at the same point in 2011. Operations Scana has focused on stabilising the company s operations and is reducing staffing levels in order to adapt cost levels to activity levels. Market The fall in activity at Leshan Scana Machinery reflects a significant downturn on the Chinese steel market, with a reduction in volume of around 40 per cent in the markets in which Scana operates. The stimulus package recently announced by the Chinese authorities is therefore important to Scana in China. Outlook Scana s key products are niche-oriented and are leading products within their market segments. The new overall corporate structure clarifies a greater focus on the energy market, increases opportunities for synergies between companies and provides clearer leadership responsibility for the individual business areas. The structure also facilitates further strategic adjustments. Scana is not assuming that there will be a more positive development in European and global trends throughout 2013, but expects profit to improve as a result of its own strategic and operational measures, along with growth within Scana s chosen focus areas. Scana is seeing a gradual increase in activity in relation to the marine market for offshore and special vessels, along with a positive order inflow with regard to the oil and gas market. Scana will be taking new orders for products such as riser components. A slight increase in activity is also expected within the FPSO market in 2013, which is another key market for Scana. Switching production to more advanced and complete products and components for the energy market (including oil and gas) is a good development and will increase Scana s market position and earning potential. Stavanger, 24 October 2012 The Board of Directors and the Group CEO Scana Industrier ASA
Profit and Loss Account - Group Quarters Year to date Full Year NOK million Q3 12 Q3 11 Q2 12 Q1 12 Q4 11 2012 2011 2011 Total operating revenues 399 449 557 559 613 1 515 1 429 2 042 Raw materials and consumables 144 168 196 205 266 545 605 871 Change in stocks and FG and WIP -10 1 9 11-10 10-2 -12 Wages and NI contributions 150 148 189 196 188 535 480 668 Other operating costs 124 123 141 150 152 415 367 519 Depreciation/amortization/writedowns 22 23 20 20 19 61 62 81 Total operating costs 431 462 554 583 615 1 567 1 512 2 127 Operating profit / (loss) - EBIT -32-13 3-23 -2-53 -83-85 Financial income 15 26 23 23 23 61 103 126 Financial expense -32-39 -29-35 -36-95 -113-149 Net financial income / expense (-) -16-13 -6-12 -12-34 -10-23 Profit / (loss) before taxes -48-27 -3-35 -14-87 -93-107 Taxation -12-7 -1-9 -0-22 -25-25 Net profit / (loss) -37-19 -3-26 -14-65 -69-83 Attributable to: Equity holders of the parent -35-21 -3-23 -14-60 -70-84 Minority interests -2 2 0-3 0-5 1 1 Earnings per share -0,12-0,13-0,01-0,10-0,09-0,22-0,41-0,50 Diluted earnings per share -0,12-0,13-0,01-0,10-0,09-0,22-0,41-0,50 Other comprehensive income Net movement in value of cash flow hegdes -4-8 -1 2-8 -3-19 -27 Net gain /loss on hegde of net investment -3-1 0 2-5 -1 5 0 Exchange difference on translations of foreign operations -2 15 7-10 11-6 -4 7 Other comprehensive income -10 6 6-6 -2-9 -18-20 Total comprehensive income -47-14 4-32 -16-75 -87-103 Key Figures: EBITDA -10 10 22-4 17 8-21 -4 EBITDA margin - % -3 % 2 % 4 % -1 % 3 % 1 % -1 % 0 % EBIT margin - % -8 % -3 % 0 % -4 % 0 % -3 % -6 % -4 % Net profit margin - % -9 % -4 % 0 % -5 % -2 % -4 % -5 % -4 % Order intake 390 443 563 520 587 1 473 1 759 2 346 Order reserve 1 234 1 325 1 262 1 272 1 304 1 234 1 325 1 304 Balance Sheet - Group NOK million 30.09.12 30.09.11 30.06.12 31.03.12 31.12.11 30.09.12 30.09.11 31.12.11 Intangible fixed assets 136 132 141 133 134 136 132 134 Deferred tax assets 54 36 47 44 37 54 36 37 Property, pland and equipment 773 747 753 752 777 773 747 777 Shares in associated companies 12 12 12 12 12 12 12 12 Total fixed assets 974 927 953 940 959 974 927 959 Inventory 367 358 353 363 378 367 358 378 Trade debtors 448 562 535 574 525 448 562 525 Derivates 3 6 5 5 6 3 6 6 Cash and cash equivalents 26 49 133 85 38 26 49 38 Assets hold for sale 0 18 0 0 0 0 18 0 Total current assets 844 993 1 026 1 027 947 844 993 947 Total assets 1 818 1 919 1 979 1 967 1 906 1 818 1 919 1 906 Paid-in capital 482 333 482 481 333 482 333 333 Other equity 193 285 237 234 269 193 285 269 Minority interests 23 28 25 25 28 23 28 28 Total shareholders equity 698 646 744 740 630 698 646 630 Interest bearing loans and borrowings 257 374 330 334 18 257 374 18 Derivates 14 1 9 8 10 14 1 10 Other non-current liabilities 66 78 72 68 71 66 78 71 Total non-current liabilities 337 453 410 410 99 337 453 99 Interest bearing loans and borrowings 183 192 140 145 490 183 192 490 Derivates 16 13 16 17 14 16 13 14 Other current liabilities 584 616 668 655 673 584 616 673 Total current liabilities 783 821 824 816 1 177 783 821 1 177 Total liabilities and shareholders equity 1 818 1 919 1 979 1 967 1 906 1 818 1 919 1 906 Key Figures: Equity ratio 38 % 34 % 38 % 38 % 33 % 38 % 34 % 33 % Gross debt 441 566 470 479 509 441 566 509 Net debt 415 517 336 393 471 415 517 471 Gearing (gross debt divided by shareholders' equity) 0,6 0,9 0,6 0,6 0,8 0,6 0,9 0,8 Equity ratio ex. Derivate 40 % 34 % 39 % 39 % 34 % 40 % 34 % 34 %
Cash Flow Statement - Group Quarters Year to date Full Year NOK million Q3 12 Q3 11 2012 2011 2011 Profit / (loss) before taxes -48-27 -87-93 -107 Tax paid -1-0 -3-1 4 Currency exchange differences and gain/loss on sale of fixed assets and non cash element 2 10 10 10 3 Depreciation/amortization/writedowns 22 23 61 62 81 Net interest expense 7 7 21 23 31 Change in net working capital -10-51 0-25 49 Net cash flow from operating activities -29-39 3-23 60 Proceeds from sale of property, plant and equipment 0 0 6 1 3 Purchase of property, plant and equipment -37-27 -69-51 -73 Proceeds from sale of shares 0-1 0 78 78 Investments in business 0 0 0-80 -80 Net cash flow from investing activities -37-27 -63-52 -72 Proceeds from long-term borrowings 0 0 349 13 13 Repayment of long-term borrowings -51-1 -395-26 -50 Net increase/(decrease) in short-term borrowings 17 49-9 68 26 Paid-in capital 0 0 141 1 1 Paid dividend 0 0 0 0 0 Paid other finance cost -2-7 -18-9 -11 Net paid interest -6-6 -20-23 -31 Net cash flow from financing activities -42 35 48 24-51 Net cash flow -108-30 -12-51 -63 Cash and cash equivalents at beginning of period 133 78 38 101 101 Net foreign exchange difference -0 0-0 -1-1 Cash and cash equivalents at end of period 26 49 26 49 38 Statement of change in shareholders equity - Group Currency translation reserves Reserves for change in value Total equity ex. minority interests Issued Own Other paidin Retained Minority Total capital shares capital earnings interest equity Equity at 1 January 2011 210 0 122 342 22 10 704 27 731 Total comprehensive income current period -84 7-27 -104 1-103 Share option programme 1 1 1 Paid in capital 0 1 1 1 Equity at 31 December 2011 210 0 124 258 28-17 602 28 630 Currency translation reserves Reserves for change in value Total equity ex. minority interests Issued Own Other paidin Retained Minority Total capital shares capital earnings interest equity Equity at 1 January 2012 210 0 124 258 28-17 602 28 630 Total comprehensive income current period -60-6 -3-69 -5-75 Share option programme 1 1 1 Paid in capital 150-3 -6 141 141 Equity at 30 September 2012 360 0 122 192 22-20 675 23 698
Notes - Group Note 1 - Overall information The condensed consolidated financial statements for Scana Industrier ASA for the third quarter 2012 was approved at the board meeting October24, 2012. The financial statement is unaudited.this interim report has been prepared in accordance with the International Financial Reporting Standards ( IFRS ), IAS 34 Interim Financial Reporting. The same accounting principles are applied in the quarterly report as in the last annual report. Note 2 - Segment information Quarters Year to date Full Year NOK million Q3 12 Q3 11 Q2 12 Q1 12 Q4 11 2012 2011 2011 Energy: Turnover 158 178 236 241 268 635 574 842 EBITDA -2 5 25 13 13 36 11 23 EBITDA margin -1 % 3 % 11 % 5 % 5 % 6 % 2 % 3 % Order intake 163 183 237 219 266 619 618 883 Order reserve 431 433 433 433 439 431 433 439 Propulsion: Turnover 78 79 95 72 96 246 256 351 EBITDA 4 6 7-1 11 10 4 16 EBITDA margin 6 % 8 % 8 % -2 % 12 % 4 % 2 % 5 % Order intake 68 52 140 61 149 270 173 323 Order reserve 240 187 246 226 235 240 187 235 Offshore: Turnover 131 147 193 214 207 537 466 674 EBITDA -1 6 1-3 -6-3 -11-18 EBITDA margin -1 % 4 % 1 % -1 % -3 % -1 % -2 % -3 % Order intake 140 176 149 199 149 488 818 967 Order reserve 474 586 479 514 534 474 586 534 Other Business: Turnover 33 52 36 33 46 102 144 190 EBITDA -4 1-2 -4 0-10 2 2 EBITDA margin -12 % 2 % -6 % -12 % 0 % -10 % 1 % 1 % Order intake 19 32 36 41 23 97 151 173 Order reserve 88 119 105 99 96 88 119 96 Other / Elimination: Turnover -2-6 -3-1 -4-6 -11-16 EBITDA -7-8 -9-8 -1-24 -27-28 Note 3 - Interest-bearing debt Per 30.09.12 Current Long-term Total interest-bearing debt 183 483 257 022 Per 31.12.11 Current Long-term Total interest-bearing debt 490 291 18 209 23 December 2011, Scana signed a term sheet with DNB, Nordea and Handelsbanken for a multi-currency fixed-term loan of SEK 348 million and an ongoing operating credit facility of NOK 280 million. This replaces the existing multi-currency fixed-term loan and ongoing operating credit facility from 2007, which fall due on 24 October 2012. The new facilities will have a term of three years. The new loan agreement was finally signed on 22 March 2012. The new credit facility has loan conditions concerning the relationship between net debt and EBITDA, equity ratio, level of investment, liquidity reserve and dividend limits. Second quarter 2012 Scana refinanced Leshan Scana Machinery Ltd. New loan agreement gives exemption from repayment until second quarter 2013 and has cross default with a new fixed-term loan and operating credit facility. Note 4 - Impairment test Scana has done an impairment at Scana Zamech due to a restructuring. There is not identified any other impairment related to the Groups tangible or intagible fixed assets. Note 5 - Other comprehensive income The figures shows the changes in value related to cash flow hedges conserning hedging of the electricity price linked to the operations in Sweden and Scana Steel Stavanger and cash flow hedging conserning hedging of the interest rate for some parts of the Groups interest - bearing debt. In addition the figures includes hedging av net investments in operations in Sweden an currency translation differences. Note 6 - Tax Tax is calculated based on profit before tax with associated tax rate in countries where businesses are located