Annual report 2010 2 Aker Solutions annual report 2010 Contents Contents 3 Key figures 4 Letter to shareholders 5 Board of Directors’ report 5 Summary 5 Business overview 6 Report for 2010 10 Company, people and community 17 Declaration by the Board of Directors and President & CFO 18 Annual accounts 19 Aker Solutions group 67 Aker Solutions ASA 75 Auditor’s report 76 Share and shareholder information 76 Share and shareholder information 80 Analytical information 81 Corporate governance 81 Corporate governance 88 Board of directors 90 Executive chairman and President 90 Business management 92 Corporate centre functions 93 Company information Aker Solutions annual report 2010 Aker Solutions annual report 2010 3 This is Aker Solutions Key figures 2010 (Continuing operations only) Orders and results 2010 2009 Order backlog 31 December NOK mill 50 775 52 740 Order intake NOK mill 46 341 49 048 Operating revenues NOK mill 46 267 49 856 EBITDA NOK mill 3 778 4 095 EBITDA-margin Percent 8.2% 8.2% Net profit NOK mill 1 658 2 186 Cash flow Cash flow from operational activities NOK mill 2 131 4 245 Balance sheet Borrowings NOK mill 8 224 7 515 Equity ratio Percent 25.9% 22.8% Return on equity Percent 17.3% 25.5% Return on captial employed1 Percent 12.1% 14.4% Share Share price 31 December NOK 99.25 75.45 Dividend per share2 NOK 2.75 2.60 Basic earnings per share (NOK) NOK 5.96 7.86 Diluted earnings per share (NOK) NOK 5.95 7.85 Employees Employees 31 December Full time equivalents 19 444 19 415 HSE Lost time incident frequency Per million worked hours 0.83 0.90 Total recordable incident frequency Per million worked hours 2.62 2.68 Sick leave rate Percent of worked hours 2.04 2.18 1) Including discontinued operations 2) Proposed dividends for 2010 4 Aker Solutions annual report 2010 This is Aker Solutions Letter to shareholders There are certain milestones that define a these transactions were completed in the speed, and at the same time further clarify The above mentioned four priorities are company like Aker Solutions. I believe the first quarter of 2011, our net debt was zero, the profile and mandate of the new reflected in the new corporate centre with three-way split of Kværner, from which Aker providing a strong foundation for further President and CEO of the company. Chief Operating Officer, Chief Technology Solutions emerged back in 2004, was such growth. I have appointed a new leadership team Officer and Chief Strategic Marketing a moment. I believe that 2010 will also go Secondly, as we enter into 2011, we which I will work with in this interim period. introduced as new functions within Aker down in history as one of the more signifi- prepare for a two-fold future. In May this The composition of the team reflects our Solutions. My expectation is that with this cant years in the history of our company. year, shareholders will be invited to decide ambitions both to keep leadership close to new organisation we will be better posi- One reason for this is that we have man- on a transfer of our large scale engineering, business and to further internationalise tioned to inspire and to drive the functional aged the aftermath of the 2008-09 financial procurement and construction (EPC) Aker Solutions. The new leadership team priorities across the business units and turmoil quite well. Although revenues project business to a new company. includes eight business leaders who will hence, further improve the performance of declined somewhat, order backlog and The relocated EPC company will have a report directly to me. Aker Solutions. profits were relatively stable, despite ex- strong position in the North Sea field Also a part of the leadership team are Furthermore, with the structural periencing unfortunate quality and perfor- develop ment market and key positions in six function heads from the corporate changes and the operational improvement mance issues that diluted our returns. selected international target markets for centre that have the responsibility for initiatives outlined above, we believe Aker Reducing such costs is naturally a para- onshore and offshore EPC projects. The shaping and safeguarding our activities Solutions and the new EPC company are mount objective of our continual improve- newly structured Aker Solutions will within key functional areas. The corporate well prepared to face the challenges and ment work in Aker Solutions. continue to provide engineering solutions, centre includes several new functions, opportunities that lie ahead. Our earnings before interest, tax, depre- product solutions and field life solutions to which we believe will be particularly impor- It is our intention to see both Aker ciation and amortisation (EBITDA) were the upstream oil and gas industry. tant in driving through our strategy. Solutions and the new EPC company grow. NOK 4.3 billion for the year 2010 and the The separation will take place through a The world needs more oil and gas, and our net profit was NOK 2.0 billion. Our financial de-merger and all Aker Solutions owners The following four topics are on the top of people and teams have the technology, position is strong and is reflected in the will receive shares in the new company. our operational improvement agenda: competence and experience required to board’s proposal to pay NOK 2.75 per Investors can thereafter adjust their share- produce hydrocarbons in a safe and share in dividend, in line with our dividend holding according to their preferred invest- Customer focus: Build strong and lasting environmentally careful way. policy. ment profile. Aker ASA, which through Aker relationships to individual customers and We believe the fundamentals are in The numbers from 2010 are now history. Holding is the leading shareholder in Aker develop regional and country strategies. place, for a lot of hard work that still Of more importance are the steps we have Solutions, has stated that it will maintain its Quality and performance: Chase opera- remains. decided to take for the future; steps which shareholding in both companies after the tional excellence (HSE, project manage- aim to create a more focused Aker demerger. ment, cost efficiency), reduce quality costs Solutions, with a more simplified and trans- Preparations for these changes are well and continue to strengthen performance parent structure. We are building an organi- underway and include the establishment of culture. Øyvind Eriksen sation which I believe will accelerate growth new organisations and leadership teams for People: Retain and attract the best and Executive Chairman and put emphasis on our company values. both companies. most competent people and ensure high First of all, we have divested substantial In this transition period, it is with great quality programs for people and leadership parts of our non-oil and gas related busi- pleasure that I have accepted the board’s development. nesses and we are reallocating our financial challenge to continue as executive chair- Technology: Focus existing technology and organisational resources. During 2010 man, and as part of this role also function processes and initiatives in the operating we announced several divestments with a as CEO. This will allow us to continue the businesses and identify and co-ordinate combined value of NOK 7 billion. When implementation of our strategy at full research and development initiatives. Aker Solutions annual report 2010 5 Board of directors’ report Board of directors’ report Summary for the oil and gas industry. The new EPC The company expects that annual average At the end of 2010 the group had 19 444 Aker Solutions has emerged from the 2008- company, provisionally named Aker growth in the years 2011-2015 could be in employes in continued businesses and 09 financial turmoil on a strong note. Contractors, will have a strong position in the 9-15 percent range, partly as a result of activities in more than 25 countries. Its Revenues declined in 2010 but profits the North Sea field development market growing markets, growing market shares head office is in Norway, at Fornebu remained at similar levels as the previous with key positions in selected international and revenues from businesses acquired in outside Oslo. The parent company, Aker year. Earnings before interest, tax and target regions. Both companies were pre- the period. Solutions ASA, is listed on the Oslo Stock depreciation (EBITDA) for the year was sented at the company’s capital markets Exchange. NOK 4.3 billion, including businesses day in December. They are described in Business overview accounted for as discontinued operations. further detail below. Principal operations Markets In 2010 order intake was NOK 51.9 Although operations have improved in Aker Solutions provides engineering Demand for Aker Solutions’ technology, billion, on the same level as in 2009. Order many parts of the business, a more detailed solutions, product solutions, field life products and services is driven by the backlog at the end of 2010 was NOK 55.4 analysis reveals opportunities for further solutions and executes large and complex world’s increasing consumption of oil and billion including discontinued operations, improvement and increased profits. The field development projects for the oil and gas for transportation, energy production marginally down from the end of 2009. continued losses in the drilling riser busi- gas industry. and industrial purposes. Bidding activity increased through 2010, ness and weak financial performance on a In 2010 the group had four reporting Market prospects are regarded as good. signalling that the company’s main markets power project in the United States are segments: Energy Development & Services The world’s energy consumption is are on the rebound. important reminders in this respect.