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Unofficial translation REPORT FOR THE THIRD QUARTER OF 1999 THIRD

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Unofficial translation REPORT FOR THE THIRD QUARTER OF 1999 THIRD Powered By Docstoc
					Unofficial translation. REPORT FOR THE THIRD QUARTER OF 1999 THIRD-QUARTER RESULT 1999 The DSND Group profit and loss account for the third quarter of 1999 shows operating revenues of NOK 690 million, compared with NOK 890 million for the same reporting period in 1998. Pre-tax profit amounted to NOK 98 million (including a NOK 79 million gain on the sale of shares in Horizon), compared with NOK 80 million for the same reporting period in 1998. The third quarter's operating profit was NOK 39 million, which is in line with company projections. The market up to this point in 1999 has been weak compared with the previous year, when the Group recorded thirdquarter operating revenues of NOK 113 million. RESULT PR SEPTEMBER 30. 1999 DSND Group operating revenues for the period 1 January through 30 September 1999 amounted to NOK 1 942 million, compared with NOK 1 935 million for the first nine months of 1998. The Group recorded an operating profit of NOK 7 million for the first nine months of 1999, compared with NOK 300 million for the corresponding period in 1998. As of 30 September 1999, the DSND Group showed a pre-tax loss of NOK 77 million, compared with a profit of NOK 247 million for the same nine-month reporting period in 1998. The pre-tax profit includes a NOK 79 million capital gains on the sale of shares, and is charged with a one-time provision of NOK 65 million related to restructuring costs in the UK. OPERATIONS Brazil The Roncador '99 project proceeded according to schedule, both technically and financially, in the third quarter. Pipelaying was completed in July using the pipelaying vessel Fennica, and the project will be completed by year-end 1999. The allocations made in the second quarter appear adequate. The test program for the pipelaying vessel KS 3000 continues. Testing has lasted six weeks longer than projected. The main reasons for the delay are that certain equipment modules previously tested in Europe failed integration tests in Brazil. Final testing remains, and the vessel is expected to enter into contract operations shortly. The rest of approximately 45 contracts between DSND Consub and Petrobras are proceeding according to schedule. DSND Consub has entered into a strategically important contract to install rigid risers up to a platform in the Roncador field. The contract is valued at approximately NOK 116 million. DSND Consub also received a total of USD 20 million in contract extensions for several vessels. The Brazilian market continues its strong growth. Norway The Troll C project was completed on time and on budget. At the Oseberg Sør project, Fennica has laid 42 kilometers of pipeline, and trenching activities are ongoing. Connecting and testing (some 20% of the project) will be completed in 2000. Tracer Offshore, owned 41.3% by DSND Søndenfjeldske, has entered into an agreement with Schlumberger Offshore Services Ltd to extend the contract for the Big Orange XVIII well intervention vessel for ten years. For DSND, the contract has a total value of NOK 116 million. Bidding activity in the offshore construction market has recently increased. Contracts to be signed are not expected to yield significant contributions until 2001. The favourable trend in the geo-technical field continued in the third quarter of 1999. Market indicators are positive for integrated services and well intervention work.

United Kingdom Activities in the UK continued to be characterized by a soft market in the third quarter. DSND Subsea Ltd carried out a project to shut down wells for Amerada Hess in 1999, and this project is expected to continue in 2000. The market for other services is weak, and rates are low. Projections for the year 2000 are for modest increased activity levels in integrated services and well intervention. For EPCI projects, several low value bids are presently being tendered for work to be completed in year 2000. Additional markets Bidding activity for deepwater projects in the Gulf of Mexico is increasing. This region may provide opportunities for growth in the coming years. ORDER BACKLOG DSND's order reserve remains solid, although order intake in the third quarter of 1999 was lower than in the same period in 1998. As of 30 September 1999, the order reserve was approximately NOK 3 800 million. The bulk of the order reserve continues to be in Brazil. OTHER ISSUES Horizon stock sold DSND sold its shareholding of 4 125 000 shares in Horizon Offshore Inc on 13 August 1999 for a net sales price of NOK 255.5 million. The Horizon stock was acquired in December 1997 for a total of NOK 86.2 million. At the time of the sale, the book value of the shares was NOK 176.2 million. The booked gain on the sale is NOK 79.3 million. Company acquisition DSND have purchased all shares in Hays Ships Ltd. and Kommander Subsea Ltd. (Hays Ships). Hays Ships owns and operates three vessels: KS 3000, KS 2000, and Kommander Subsea. The transaction secures control of one of DSND's core vessels and strengthens the

Group's fleet for integrated services and pipelaying. SHARE ISSUE As part of the acquisition of Hays Ships, DSND carried out a private placement of 4.4 million shares to Orkla Finans’ customers on 6 October 1999. A placement of 1.7 million shares to the seller of Hays Ships was carried out on 8 November. The number of DSND shares outstanding after the two placements as of November 8. is 54 833 005. OUTLOOK Operating profit for 1999 will be affected by a weaker market than projected in the Norwegian and the British sectors of the North Sea. Fennica and Nordica have been returned to the Finnish shipping and navigation authorities ahead of schedule due to the weak North Sea market. Unless the UK market improves shortly, the company will make adjustments to its fleet. Restructuring work in the UK has taken longer than anticipated; thus cost-cutting measures will not take full effect before January 2000 (compared with September 1999, as previously reported). The extension of the KS 3000 testing program will also affect fourth-quarter profits. The completion of the Roncador '99 project has proceeded according to expectations. The company's goal for 1999 as a whole continues to be eliminating the loss reported for the first nine months of the year. Achievement of this goal is contingent on the company carrying out one of several planned sales of non-core business activities. Oslo, November 9 1999 For the Directors of DSND Søndenfjeldske ASA Kristian Siem Chairman

COMMENTS TO THE 3. QUARTER FINANCIAL FIGURES PROFIT AND LOSS ACCOUNT Geographic distribution of operating revenues: Figures in NOK million 3Q 1999 Brazil Norway UK Total 407 186 97 690 3Q 1998 153 246 491 890 Pr 30 Sept. 1999 1 011 576 355 1 942 Pr 30 Sept. 1998 249 586 1 100 1 935

Operating revenues for the period 1 January through 30 September 1999 include sales gains of NOK 69 million, of which NOK 3 million was recorded to the profit and loss account in the third quarter. Financial income includes a gain of NOK 79 million on the sale of DSND's shareholding in Horizon Offshore Inc. In the third quarter, financial expences were significantly reduced compared to the second quarter due to a significant lower average short-term interest-bearing debt in Brazil and the UK during the third quarter. Also, second-quarter profits were charged with a NOK 13 million foreign currency loss related to the refinancing of long-term debt. BALANCE SHEET The acquisition of Hays Ships and the share issue made as part of the acquisition are included in the balance sheet as of 30 September 1999. Fixed assets Intangible fixed assets increased by the addition of goodwill from the acquisition of Hays Ships. The item ships and equipment increased by NOK 528 million due to the acquisition of Hays Ships and investments in KS 3000 and Scandinavica. In the third quarter, depreciation on fixed assets was at the same level as in the second quarter, as none of the new investments were in operation in the third quarter of 1999. Current assets Current assets mainly comprise trade accounts receivable; these continue to include receivables of approximately NOK 200 million on outstanding disputes. As of 30 September 1999, investments amounted to zero, due to the sale of the Horizon shareholding. Shareholders' equity Shareholders' equity increased by the profit for the third-quarter reporting period and by NOK 215 million from the issue of 4.4 million shares related to the acquisition of Hays Ships. In addition, shareholders' equity increased by NOK 4.8 million from the issue of 73 530 shares to Paulo Tupinamba, President and CEO of DSND Consub. The share issue was settlement for purchase of the

remaining shares in DSND Consub SA. Other changes are due to currency translation differences charged against equity. Liabilities Deferred tax increased due to the purchase of Hays Ships. There are no other changes in deferred taxes payable, with the exception of minor currency translation differences, compared with secondquarter figures. Net interest-bearing debt increased from NOK 1 470 million to NOK 1 484 million. Net debt increased by NOK 168 million due to the purchase of Hays Ships. In the third quarter, NOK 82 million was paid down on long-term debt, whereas the short-term interest-bearing debt in Brazil and the UK were adjusted downward by NOK 72 million.

Profit & Loss Accounts - DSND Group
Amounts in NOK 1.000 Operating Revenues and Costs Operating revenues Operating costs Ordinary depreciation Total operating costs Net Operating Profit Net result from affiliated companies Financial Income / (Expenses) Financial income Financial expenses Net financial items Ordinary result before other items and taxes Merger cost Income (loss) for the period 84 819 (25 688) 59 131 97 701 0 97 701 10 921 (26 193) (15 272) 102 770 (22 271) 80 499 97 301 (115 833) (18 532) (11 536) (65 000) (76 536) 20 926 (55 839) (34 913) 282 283 (35 000) 247 283 126 640 (127 455) (815) 319 807 (34 100) 285 707 689 786 (595 592) (54 973) (650 565) 39 221 (651) 890 018 (742 058) (34 607) (776 665) 113 353 4 689 1 941 646 (1 789 938) (145 142) (1 935 080) 6 566 430 1 934 701 (1 525 453) (109 303) (1 634 756) 299 945 17 251 2 769 022 (2 323 508) (143 462) (2 466 970) 302 052 18 570 3rd Quarter 1999 3rd Quarter 1998 At 30.09 1999 At 30.09 1998 Total 1998

Balance Sheet - DSND Group
Amounts in NOK 1.000 Assets Fixed assets Intangible fixed assets Ships and equipment Other fixed assets Total fixed assets Current assets Current assets Investments Cash and bank deposits Total current assets Total assets 30.09.99 30.09.98 31.12.98

111 376 2 395 043 195 180 2 701 599

140 604 1 338 344 346 543 1 825 491

141 231 1 719 624 228 140 2 088 995

882 156 0 179 893 1 062 049 3 763 648

1 103 928 0 224 486 1 328 414 3 153 905

1 090 140 176 437 242 332 1 508 909 3 597 904

Equity and liabilities Equity Share capital Reserves This periods result Total Equity Liabilities Deferred tax liability Long term liabilities Short term liabilities Total liabilities Total equity and liabilities

53 078 1 476 001 (76 536) 1 452 543

91 463 822 908 247 283 1 161 654

41 556 850 530 271 468 1 163 554

117 449 1 556 955 636 701 2 311 105 3 763 648

35 614 1 084 526 872 111 1 992 251 3 153 905

59 226 1 225 715 1 119 409 2 404 350 3 567 904


				
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Description: Unofficial translation REPORT FOR THE THIRD QUARTER OF 1999 THIRD