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The company has the resources, organization, competence and assets to maintain current and new activity levels initiated by clients.
"The first months of 2020 have been unlike anything we have previously experienced. The COVID-19 pandemic, coupled with the sharp drop in demand for oil and gas, has caused significant disruption to the global economy and left societies around the world grappling with new ways of working and living. The global energy sector has been hit particularly hard, and at Aker Solutions we are doing our utmost to mitigate the effects for employees, customers, shareholders and other stakeholders worldwide," said Luis Araujo, chief executive officer of Aker Solutions.
Unprecedented measures have been implemented around the world to stop the spread of the virus, including travel restrictions and quarantine provisions. These measures cause challenges for both Aker Solutions and its customers' operations. This affects the entire value chain and has led to lower activity levels than planned. It is expected that the level of activity going forward will be reduced considerably and Aker Solutions' revenues will decline by a minimum of 20 percent compared to the outlook at end of 2019.
The company’s priority is to protect the safety and wellbeing of its employees, while also mitigating substantial operational disruptions. Measures implemented to date include:
Aker Solutions’ main financial priority is to protect the company's balance sheet and financial performance. The company has initiated measures to reduce the company's cost and investment level.
"While it is too early to predict the long-term impact on financial markets and industrial activity level, the current market situation is expected to have an adverse impact on both activity, financial performance and structure of Aker Solutions in 2020," said Araujo. "A large part of the planned project sanctioning activity in the oil industry will most likely be postponed or cancelled in 2020 unless governments are introducing significant fiscal stimulation to aid in the recovery."
Before the COVID-19 pandemic, the company had already introduced cost-saving initiatives in key segments, including subsea, in order to address the overall cost base. The company is now accelerating and deepening these efforts. The initiatives aim to reduce the company's fixed cost level by a total, of at least NOK 750 million on an annualized basis by:
In addition, the investment level will be significantly reduced in 2020, from the original plan of about NOK 750 million to about NOK 500 million. Close to NOK 200 million of the NOK 500 million has already incurred to date, with the remainder committed. This equates to approximately a 45 percent reduction in the investment level for the remaining part of 2020.
The company will continue to assess the need for additional manning and capacity adjustments including potential closures of production and office locations, in close dialogue with customers, employee representatives, and relevant third parties.
One-off restructuring costs of about NOK 150 million and impairments of around NOK 500 million are expected to be booked in the first quarter of 2020 as a result of these initiatives. Further restructuring cost may occur in later quarters.
The company is currently scheduled to update investors with its first quarter 2020 results and an updated market view on April 30, 2020.
Aker Solutions helps the world meet its energy needs. We engineer the products, systems and services required to unlock energy. Our goal is to maximize recovery and efficiency of oil and gas assets, while using our expertise to develop the sustainable solutions of the future. Aker Solutions employs approximately 16,000 people in more than 20 countries.
This press release may include forward-looking information or statements and is subject to our disclaimer, see https://akersolutions.com
This information is subject of the disclosure requirements pursuant to section 5-12 of the Norwegian Securities Trading Act.