TechnipFMC Announces First Quarter 2020 Results

  • Backlog of $22 billion, $5.6 billion in cash and liquidity
  • Cost savings target increased and will now exceed $350 million
  • Executive salaries and Directors’ retainer reduced up to 30% through year-end
  • Dividend distribution for 2020 reduced by 75% versus the prior year
  • Updated outlook reflects uncertainty related to COVID-19 and customer spend
  • U.S. GAAP diluted loss per share was $7.28

    • Includes total after-tax charges, net of credits, of $7.17 per diluted share, primarily driven by non-cash impairment charges
  • Adjusted diluted loss per share, excluding charges and credits, was $0.11

    • Includes foreign exchange losses of $0.10 per diluted share
    • Includes expense resulting from increased liability to joint venture partners of $0.08 per diluted share

 

LONDON & PARIS & HOUSTON–(BUSINESS WIRE)–Regulatory News:

TechnipFMC plc (NYSE: FTI) (Paris: FTI) today reported first quarter 2020 results.

Summary Financial Statements – First Quarter 2020

Reconciliation of U.S. GAAP to non-GAAP financial measures are below and in financial schedules.

Three Months Ended

(In millions, except per share amounts)

March 31,

2020

March 31,

2019

Change

Revenue

$3,130.3

$2,913.0

7.5%

Net income (loss)

$(3,256.1)

$20.9

n/m

Diluted earnings (loss) per share

$(7.28)

$0.05

n/m

 

 

 

 

Adjusted EBITDA

$220.2

$295.8

(25.6%)

Adjusted EBITDA margin

7.0%

10.2%

(320 bps)

Adjusted net income (loss)

$(49.1)

$27.3

n/m

Adjusted diluted earnings (loss) per share

$(0.11)

$0.06

n/m

 

 

 

 

Inbound orders

$2,099.0

$6,184.5

(66.1%)

Backlog

$21,962.1

$17,777.6

23.5%

 

Total Company revenue was $3,130.3 million. Net loss was $3,256.1 million, or $7.28 per diluted share. These results included after-tax charges and credits totaling $3,207 million of expense, or $7.17 per diluted share. Adjusted net loss was $49.1 million, or $0.11 per diluted share.

Total after-tax charges and credits in the quarter of $3,207 million (Exhibit 8) were as follows:

  • Non-cash impairment and other charges totaling $3,159.9 million for goodwill and other assets in the Subsea and Surface Technologies segments;
  • Separation costs, restructuring and other charges, purchase price accounting adjustments and a tax benefit from a valuation allowance totaling $40.3 million; and
  • Direct COVID-19 expenses totaling $6.8 million. These expenses do not capture the disruption related to overhead absorption, utilization and other operational impacts.

Adjusted EBITDA, which excludes pre-tax charges and credits, was $220.2 million; adjusted EBITDA margin was 7 percent (Exhibit 9).

Other significant pre-tax items impacting the quarter, for which we do not provide guidance, included the following:

  • $43.3 million of foreign exchange losses included in corporate expense, or $0.10 per diluted share on an after-tax basis; and
  • $35.5 million of expense resulting from increased liability payable to joint venture partners included in interest expense, or $0.08 per diluted share on an after-tax basis.

In response to the current market environment, the Company recently announced a series of cost reduction initiatives that will result in annualized savings of at least $130 million from the Surface Technologies segment and Corporate.

The Company has now identified actions that will result in additional savings of more than $220 million that will extend to all business segments and support functions. Total annualized savings are now estimated to exceed $350 million. The Company anticipates achieving the targeted savings run-rate by the end of the year.

Additionally, we have announced revisions to compensation through the end of the year which include a 30 percent reduction to the Chairman and Chief Executive Officer’s salary; a 30 percent reduction in the Board of Directors’ retainer; and a 20 percent reduction to the Executive Leadership team’s salaries.

Doug Pferdehirt, Chairman and CEO of TechnipFMC stated, “Over the last two months, much about the world has changed, and we are taking swift and decisive actions in response to the market environment. These actions will generate more than $350 million in annualized cost savings. Additionally, our Board of Directors announced a revision to the dividend policy that will further strengthen the balance sheet and preserve liquidity.”

Pferdehirt added, “TechnipFMC has been an agent of change in the energy industry for some time, and we will look to accelerate our change agenda in the current environment. We will continue to invest in new technologies and digital platforms. We will continue to position ourselves to play a key role in the energy transition. We will further strengthen and expand our partner relationships and more closely align with customers who embrace a new way of working together. This approach has already demonstrated significant value, and we believe this will prove to be even more meaningful throughout the current cycle.”

We are well-positioned to manage the unprecedented uncertainty the industry is facing today. The size and duration of our $22 billion of backlog – driven in part by the record inbound booked in 2019 – and our $5.6 billion in cash and liquidity provide us with the flexibility to take aggressive and bold actions during this challenging period.”

Pferdehirt continued, “Onshore/Offshore has been renamed Technip Energies, in-line with the new scope of the business. COVID-19 and a more challenging macro backdrop have softened near-term LNG markets, but the long-term fundamentals for natural gas – and LNG in particular – remain strong. We continue to be engaged in several LNG prospects that could move forward in the near-to-intermediate term. In the more resilient downstream market, we see the potential for additional prospects to be awarded to Technip Energies during 2020, one of which could exceed $1 billion in order value. Our exposure to energy transition markets continues to increase with recent success in renewable fuels and recycling.”

In Subsea, sanctioning on a number of greenfield projects is likely to shift from the current year, impacting our previous projection for 2020 orders. We continue to assess nearly $15 billion of large project opportunities, of which approximately 50 percent are still likely to move forward over the next 24 months. All other projects remain active but potentially extend beyond this timeframe. Over the next 12 months, we believe as much as 20 percent of these project opportunities are likely to reach FID, and we are well-positioned for many of these opportunities.”

For Surface Technologies, the longer-term trends remain favorable for several international markets, such as the Middle East and Asia, and we anticipate that international revenue in 2020 will be far less impacted than North America. Our vertical integration outside of North America provides us with more control over manufacturing and less dependency on external supply chains, helping to mitigate delivery disruptions while affording us new opportunities where industry supply has been challenged.”

Pferdehirt concluded, “Our priority remains on the safety and well-being of the exceptional women and men of TechnipFMC whose commitment throughout this crisis has been exemplary. We are closer than ever to our clients, and together, our collective actions are enabling us to continue advancing our projects, albeit at reduced productivity.”

We do not underestimate the challenges ahead, and we are confident we will emerge an even stronger player.”

Operational and Financial Highlights – First Quarter 2020

Subsea

Financial Highlights

Reconciliation of U.S. GAAP to non-GAAP financial measures are below and in financial schedules.

Three Months Ended

(In millions)

March 31,

2020

March 31,

2019

Change

Revenue

$1,253.1

$1,185.3

5.7%

Operating profit (loss)

$(2,750.7)

$49.9

n/m

Adjusted EBITDA

$104.8

$139.7

(25.0%)

Adjusted EBITDA margin

8.4%

11.8%

(340 bps)

 

 

 

 

Inbound orders

$1,172.1

$2,677.6

(56.2%)

Backlog

$7,773.5

$7,477.3

4.0%

 

Subsea reported first quarter revenue of $1,253.1 million, up 5.7 percent from the prior year, driven by the strong inbound orders in prior periods. Revenue growth was driven by strength in the United States and Norway. The growth was partially offset by foreign exchange translation of $66 million due to the strengthening U.S. dollar and COVID-19 related disruptions to supply chain and operations.

The global COVID-19 pandemic created headwinds to both revenue and profit in the quarter. Project and service disruptions varied, and in some instances, the impacts delayed revenue recognition to future periods. Reduced productivity and lower asset utilization had a modestly negative impact to profitability in the period.

In the quarter, Subsea recorded non-cash impairment and other charges totaling $2,776.5 million, which included:

  • Goodwill impairment charge of $2,747.5 million due to the decline in the Company’s market capitalization with no further goodwill attributable to the segment; and
  • Fixed asset impairment charges totaling $29 million primarily driven by lower projected demand for certain installation and service equipment.

Subsea reported an operating loss of $2,750.7 million; adjusted EBITDA was $104.8 million with a margin of 8.4 percent, a decrease of 340 basis points from the prior-year quarter. Adjusted EBITDA declined versus the prior year due to the negative operational impacts of COVID-19 and the absence of more favorably priced backlog which benefited the prior-year period.

First Quarter Subsea Highlights

  • BP Atlantis Phase 3 iEPCI™ (Gulf of Mexico)

Completion of fabrication and installation of the flowline system.

  • ExxonMobil Liza Phase 1 (Guyana)

Final subsea trees delivered.

  • Energean Deepwater Well Services (Israel)

First gas flowback and well clean-up to the Stena DrillMAX drillship using the newly developed deepwater landing string on a three well completion campaign for the Karish project.

Subsea inbound orders for the quarter were $1,172.1 million, resulting in a book-to-bill of 0.9. The following announced awards were included in the period:

  • BP Platina iEPCI™ Project (Angola)

Significant* integrated engineering, procurement, construction and installation (iEPCI™) contract from BP Angola for the Platina field development. The contract covers the manufacture, delivery and installation of the subsea equipment including subsea trees, a production manifold with associated subsea control and connection systems, as well as rigid pipelines, umbilicals and flexible jumpers.

* A “significant” award ranges between $75 million and $250 million.

  • Woodside Lambert Deep and Greater Western Flank iEPCI™ Project (Australia)

Significant* integrated engineering, procurement, construction and installation (iEPCI™) contract from Woodside Energy Limited for the development of the Lambert Deep and Phase 3 of the Greater Western Flank fields. TechnipFMC will design, manufacture, deliver and install subsea equipment including subsea production system, flexible flowlines and umbilicals for connection to the Angel Platform. This is the second contract under the recently announced five-year iEPCI™ Frame Agreement between TechnipFMC and Woodside.

* A “significant” award ranges between $75 million and $250 million.

Subsea

Estimated Backlog Scheduling as of March 31, 2020

(In millions)

Consolidated backlog1,2

Non-consolidated backlog3

2020 (9 months)

$3,100

$106

2021

$2,800

$132

2022 and beyond

$1,874

$524

Total

$7,774

$762

1 Backlog in the period was reduced by a foreign exchange impact of $644 million.

2 Backlog does not capture all revenue potential for subsea services.

3 Non-consolidated backlog reflects the proportional share of backlog related to joint ventures that is not consolidated due to our minority ownership position.

Consolidated backlog at quarter end was $7,773.5 million, of which approximately $3,100 million is scheduled for execution over the remainder of 2020. The Company continues to engage with its customers and alliance partners as they work to update their business plans. The backlog reflects the current expectations for the timing of project execution. The Company did not receive any cancellations for projects in backlog during the period.

Technip Energies

The Onshore/Offshore segment has been renamed Technip Energies and includes Genesis, Loading Systems and Cybernetix.

Financial Highlights

Reconciliation of U.S. GAAP to non-GAAP financial measures are below and in financial schedules.

Three Months Ended

(In millions)

March 31,

2020

March 31,

2019

Change

Revenue

$1,547.7

$1,335.1

15.9%

Operating profit

$151.2

$155.7

(2.9%)

Adjusted EBITDA

$167.1

$194.8

(14.2%)

Adjusted EBITDA margin

10.8%

14.6%

(380 bps)

 

 

 

 

Inbound orders

$560.6

$3,138.9

(82.1%)

Backlog

$13,766.6

$9,862.7

39.6%

 

Technip Energies reported first quarter revenue of $1,547.7 million. Revenue increased 15.9 percent from the prior-year quarter, primarily driven by higher activity in Europe, North America and our Process Technology business. The continued ramp-up of Arctic LNG 2 and increased activity on downstream projects more than offset the decline in revenue from Yamal LNG which continues to progress through the warranty phase. COVID-19 related operational inefficiencies and business disruption impeded revenue growth in the quarter.

Technip Energies reported operating profit of $151.2 million; adjusted EBITDA was $167.1 million. Operating profit decreased 2.9 percent versus the prior-year quarter primarily due to a reduced contribution from Yamal LNG and lower margin realization on early stage projects, including Arctic LNG 2. Project execution remained strong across the portfolio. These same factors drove the year-over-year decrease in adjusted EBITDA. Adjusted EBITDA margin decreased 380 basis points from the prior-year results to 10.8 percent.

First Quarter Technip Energies Highlights

  • ENI Coral South FLNG (Mozambique)

Successful launch of the hull. Fabrication activities well underway for the 12 gas treatment and LNG Topside modules; living quarters and pipe rack already installed.

  • Arctic LNG 2 (Russia)

First pile drilled ahead of schedule at Gydan Arctic site.

  • Energean Karish FPSO (Israel)

FPSO hull sailed away from the Chinese yard; arrived in Singapore in mid-April.

  • ENOC Refinery (Dubai)

Positive performance testing program with all test runs carried out by end of March.

  • ZheJiang Petroleum & Chemical Co. Ethylene Plant (China)

Rapid startup of a 1,400 KTA ethylene plant where TechnipFMC provided license and process design as well as other key proprietary components.

Partnership and Alliance Highlights

  • Partnership with Neste for future NEXBTL™ technology-based projects

TechnipFMC to provide Front End Loading services; agreement also covers TechnipFMC’s participation during the execution phase of future NEXBTL projects. This technology allows the conversion of second generation feedstock, like vegetable oil or waste fat, into renewable diesel and other renewable products.

  • Alliance extension with BP Petrochemicals to BP Infinia technology

Extension of our purified terephthalic acid (PTA) and acetic acid alliance to include Infinia technology, which enables circularity for difficult-to-recycle PET plastic waste, such as highly-colored bottles and food trays.

Technip Energies inbound orders for the quarter were $560.6 million, resulting in a book-to-bill of 0.4. Despite the absence of an announced project award, front-end engineering and other services activity as well as our Process Technology business continued to exhibit inbound order resilience.

Technip Energies

Estimated Backlog Scheduling as of March 31, 2020

(In millions)

Consolidated backlog1

Non-consolidated backlog2

2020 (9 months)

$4,828

$648

2021

$5,232

$694

2022 and beyond

$3,707

$1,009

Total

$13,767

$2,350

1 Backlog in the period was reduced by a foreign exchange impact of $398 million.

2 Non-consolidated backlog reflects the proportional share of backlog related to joint ventures that is not consolidated due to our minority ownership position.

Surface Technologies

Financial Highlights

Reconciliation of U.S. GAAP to non-GAAP financial measures are below and in financial schedules.

Three Months Ended

(In millions)

March 31,

2020

March 31, 2019

Change

Revenue

$329.5

$392.6

(16.1%)

Operating profit (loss)

$(424.0)

$10.5

n/m

Adjusted EBITDA

$24.5

$30.1

(18.6%)

Adjusted EBITDA margin

7.4%

7.7%

(30 bps)

 

 

 

 

Inbound orders

$366.3

$368.0

(0.5%)

Backlog

$422.0

$437.6

(3.6%)

 

Surface Technologies reported first quarter revenue of $329.5 million, a decrease of 16.1 percent from the prior-year quarter. The revenue decline was primarily driven by the slowdown in operator activity in North America and the reallocation of the Loading Systems business to Technip Energies. Despite travel and supply chain impacts of COVID-19, revenue outside North America increased modestly and represented just over 50 percent of total Surface Technologies revenue in the period.

In the quarter, Surface Technologies recorded non-cash impairment and other charges totaling $411.5 million, which included:

  • Goodwill impairment charge of $335.9 million due to the decline in the Company’s market capitalization with no further goodwill attributable to the segment; and
  • Fixed asset impairment charges totaling $75.6 million primarily driven by expectations for lower stimulation activity in North America.

Surface Technologies reported an operating loss of $424 million; adjusted EBITDA was $24.5 million with a margin of 7.4 percent. When compared to the prior-year period, operating margin outside North America improved despite the COVID-19 impacts on the current year result.

Inbound orders for the quarter were $366.3 million. Backlog decreased 3.6 percent versus the prior-year quarter to $422 million. Given the short-cycle nature of the business, orders are generally converted into revenue within twelve months.

First Quarter Surface Technologies Award Highlights

  • ADNOC (United Arab Emirates)

Received orders for 57 sets of high-specification, clad equipment for onshore Abu Dhabi and 330 annular safety valves for offshore fields.

  • ROSO Technologies (China)

Inbound orders for 20,000 psi pressure control flowlines and 60 well service pumps totaling 180,000 horsepower.

  • Dana Petroleum Unity Project (Netherlands)

Contract to supply surface wellheads, trees and services for the Unity Project offshore Netherlands; scope of supply is from our standardized product offering.

Corporate and Other Items

Corporate expense in the first quarter was $112.2 million. This includes charges and credits totaling $30.7 million of expense. Excluding charges and credits, corporate expense was $81.5 million which included $43.3 million of foreign exchange losses. The foreign exchange losses resulted from the impact of the strengthening U.S. dollar on hedging costs and timing differences in naturally hedged projects.

 

Three Months Ended

(In millions)

March 31,

2020

Corporate expense, reported

$112.2

Less charges and (credits) [Exhibit 9]

$30.7

Corporate expense, adjusted

$81.5

Less foreign exchange losses

$43.3

Corporate expense, adjusted and excluding foreign exchange losses

$38.2

Net interest expense was $72 million in the quarter, which included an increase in the liability payable to joint venture partners of $35.5 million.

The Company recorded a tax provision in the quarter of $37.7 million. The quarterly tax rate was impacted by the non-deductible impairment charges recorded in the quarter.

Total depreciation and amortization for the quarter was $120.4 million.

Cash flow from operations in the quarter was $27.9 million. The Company ended the period with cash and cash equivalents of $4,999.4 million, of which approximately $3,200 million was held in joint ventures. Operating cash and cash equivalents totaled approximately $1,800 million, a significant portion of which was readily available for corporate use. Net cash at the end of the period was $588.8 million.

Liquidity

The Company’s liquidity is supported by a revolving credit facility (RCF) of $2.5 billion. The committed credit backstops our ability to issue commercial paper obligations on a long-term basis. The available capacity under the RCF is reduced by our outstanding commercial paper balance and any borrowings under the facility. As of March 31, 2020, the Company had $1,374 million of commercial paper outstanding and had drawn down $500 million from the RCF in response to the conditions in the commercial paper markets.

Dividend

The Company recently announced that its Board of Directors has revised its dividend policy to $0.13 per share on an annualized basis. The Company made a dividend payment of $0.13 per share earlier this month, and this fulfills the annual dividend distribution for 2020. The revised dividend policy will reduce the annual cash distribution by $175 million when compared to the prior year.

The Company intends to pay its 2021 dividend in quarterly installments beginning in April 2021.

2020 Financial Guidance1

The Company’s full-year guidance for 2020 can be found in the table below.

All segment guidance assumes no further material degradation from COVID-19 impacts.

2020 Guidance *Updated April 22, 2020

 

Subsea

In lieu of specific revenue and EBITDA margin guidance, we provide the following:

 

● $3.1 billion of backlog to be converted into revenue for remainder of the year

 

● Inbound orders to be down as much as 50% versus 2019

 

● Subsea Services revenue to be approximately $1 billion for the full year

 

● Installation campaigns extend to 2021; limited flexibility to mitigate near-term costs

 

Technip Energies

Revenue in a range of $6.3 – 6.8 billion

 

EBITDA margin at least 10% (excluding charges and credits)

 

 

Surface Technologies

In lieu of specific revenue and EBITDA margin guidance, we provide the following:

 

● International market to represent ~60% of revenue mix

 

● Vertical integration and technology differentiation benefits internationally

 

 

● Aggressive actions to North America cost base; expect to be modestly profitable

(excluding charges and credits)

 

 

TechnipFMC

Corporate expense, net $165 – 175 million for the full year (excluding the impact of foreign currency fluctuations)

 

Net interest expense $80 – 90 million for the full year (excluding the impact of revaluation of partners’ mandatorily redeemable financial liability)

 

Capital expenditures approximately $300 million for the full year

_______________________

1 Our guidance measures adjusted EBITDA margin, corporate expense, net (excluding the impact of foreign currency fluctuations) and net interest expense (excluding the impact of revaluation of partners’ mandatorily redeemable financial liability) are non-GAAP financial measures. We are unable to provide a reconciliation to comparable GAAP financial measures on a forward-looking basis without unreasonable effort because of the unpredictability of the individual components of the most directly comparable GAAP financial measure and the variability of items excluded from each such measure. Such information may have a significant, and potentially unpredictable, impact on our future financial results.

Teleconference

The Company will host a teleconference on Thursday, April 23, 2020 to discuss the first quarter 2020 financial results. The call will begin at 1 p.m. London time (8 a.m. New York time). Dial-in information and an accompanying presentation can be found at www.TechnipFMC.com.

Webcast access will also be available on our website prior to the start of the call. An archived audio replay will be available after the event at the same website address.

Contacts

Investor relations

Matt Seinsheimer

Vice President Investor Relations

Tel: +1 281 260 3665

Email: Matt Seinsheimer

Phillip Lindsay

Director Investor Relations (Europe)

Tel: +44 (0) 20 3429 3929

Email: Phillip Lindsay

Media relations

Christophe Bélorgeot

Senior Vice President Corporate Engagement

Tel: +33 1 47 78 39 92

Email: Christophe Belorgeot

Brooke Robertson

Public Relations Director

Tel: +1 281 591 4108

Email: Brooke Robertson

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