Eidesvik Offshore ASA (0E9O.L) Earnings Call Transcript & Summary

Good morning, everybody. And welcome to Eidesvik Offshore ASA's H1 presentation. Attending this webcast from our end is our CFO, Lars Tufteland Engelsen; and myself, CEO, Helga Cotgrove. We will address any questions submitted during the webcast at the end of the presentation. We kindly ask you to take note of the text on this disclaimer slide. We had freight revenues of NOK 198 million in the quarter, which is up almost 7% from the NOK 186 million for the same period last year and at the same level as Q1 this year. Our EBITDA was NOK 76 million compared to NOK 71 million in Q2 '24. The EBITDA margin was 38%, which is the same as Q2 '24. The increase is due to the increased utilization quarter-on-quarter. We're also seeing an improvement from Q1 EBITDA this year on similar revenue numbers. Lars will provide further details on the financials. Consolidated backlog is close to NOK 3.4 billion, an increase of around NOK 500 million from Q2 2024. We're keeping our balance sheet strong with an equity ratio of 62% and NOK 525 million in net interest-bearing debt. Net interest-bearing debt has increased due to the progress on our 2 newbuilds. Our cash balance is NOK 305 million, down from NOK 396 million at year-end due to the newbuild investments where we're financing the equity portion with cash on hand. In April, we are pleased to announce the declaration of the remaining option for 2026 from Subsea7 for the vessel Seven Viking. In addition, 2027 was added as a firm period and 2028 as a further auction. 2027 and 2028 rates on the contract reflects the improvement in the market. We continue to progress on our Q2 Subsea newbuild vessel. The first of them are scheduled to be delivered in the intersection between Q1 and Q2 next year and the second at a similar time in 2027. As a subsequent to went to this quarter, the Board of Directors have decided to distribute a dividend of NOK 0.30 per share. Total fleet utilization for the quarter was close to 98%. In the Supply segment, utilization was 96% due to a scheduled repair or net increase. For Subsea and Offshore renewables, utilization was close to 100% for the quarter. We're happy to report that we continued a good trend this year with no LTIs. However, we continue to see an uptick in first aid incidents. Hence, continued focus is needed to turn this trend around. Our contract backlog is now NOK 3.4 billion. This includes our share of the JV with Subsea7. Renewable backlog continued to be steady and we see interest in vessels that are capable of operating in both the subsea and the renewable market. It makes sense to consider this when evaluating investments. This also creates opportunity for increased utilization. Our total contract coverage is at the moment, 100%. We currently have available capacity within the PSV space from Q1 or from Q1 next year, alternatively Q4 this year, depending a bit on some outstanding options. And we are actively exploring new opportunities for vessels that will be available. We're confident in our capability in securing new activity. Our vessels are attractive in size and we have a strong record in technical utilization and operational competence. We also look forward to continue working with our customers in focusing on emission reduction. Our fleet in combination with our organization is well positioned to continue this work. Despite ongoing geopolitical uncertainties, demand -- oil demand continues to be steady and also expected to grow into 2026. Some of the major oil companies have signaled modest reduction in CapEx for '25 and '26, but leading EPC contractors continue to report -- record strong backlogs and tendering activity in the subsea segment. Demand for platform supply vessels in the North Sea increased in Q2, accompanied buying rice in day rates. However, overall activity is somewhat subdued. Activity is expected to remain flat through '25 with an uptick anticipated in '26 and '27. An uptick in operator securing offshore drilling rigs is noted. This is in line with the expectation of increased activity levels in '26, '27 and '28, as the major operators maintain their intention to address production decline. Within Subsea and renewables ship bonus with available vessels continued to announce new fixtures with the Brazilian market accounting for a significant share. Subsea activity is expected to remain high, and the current backlog is driving demand for suitable vessel tonnage. In the renewable market, the underlying market remains resilient despite some project cancellation. Now I hand over to Lars for the financials.

Thank you, Helga. Please note all numbers are in Norwegian krona. Revenue in the second quarter of 2025 was NOK 198.5 million compared to NOK 197.8 million in the second quarter. Adjusted for order income in the quarter in 2024, revenue increased about 7% quarter-on-quarter, mainly due to non-main class renewals in this quarter and hence a positive effect on utilization versus 1 main class renewal in Q2 2024. EBITDA was NOK 76.4 million compared to NOK 82.5 million in the same quarter in 2024. Adjusted for other income in Q2 '24, the adjusted EBITDA for that quarter was NOK 17.7 million. Personnel expenses in the quarter increased compared to the same quarter in 2024, mainly due to general salary adjustments, but also due to need for use of expensive temporary personnel. Compared to the first quarter 2025, freight revenue was on the same level in the second quarter. EBITDA increased by NOK 4.2 million due to a decrease in both personnel costs and in other operating costs. Joint ventures had a loss of NOK 0.7 million compared to a profit of NOK 3.2 million in Q2 2024. The 2024 numbers are affected by insurance proceeds received in second quarter 2024. The result of the JV is also affected by the same customer cost increase, as already mentioned. Operating result was NOK 29.1 million in the quarter compared to NOK 41.2 million in the same quarter in 2024. Adjusted for other income, operating results for Q2 '24 was NOK 29.4 million. Net financial items improved from minus NOK 2 million to NOK 0.9 million quarter-on-quarter. Reduced financial expenses for Q2 '25 versus Q2 '24 are mainly due to increase in capitalized borrowing costs on the newbuilds according to IAS 23. In addition, a positive currency effect, mainly related to the loan in U.S. dollar resulted in additional of NOK 2.3 million in the quarter compared to a [indiscernible] of NOK 1.1 million in the same quarter in 2024. Pretax was out in Q2 2025 was NOK 30.1 million compared to NOK 39.2 million in the second quarter 2024. If we take a look at our segments on the next page. We see in our Supply segment, revenue quarter-on-quarter had an increase to NOK 105.5 million compared to NOK 96.8 million in Q2 '24. This is mainly due to higher utilization. EBITDA increased from NOK 36.2 million to NOK 40.5 million in the segment. The EBITDA margin increased from 37% to 38%. Utilization was 96% in Q2 '25 and 92% in Q2 '24. We own 6 vessels in this segment and in addition and management of 2. For Subsea & Renewables, revenue had a minor increase from NOK 103.1 million to NOK 104 million quarter-on-quarter. These numbers include our consolidated numbers, plus 50% of revenue from the vessel Seven Viking. EBITDA decreased from NOK 56.8 million to NOK 52.3 million. EBITDA margin is 50%, which is a decrease from 55% in Q2 2024. This decrease is mainly due to received insurance proceeds in the second quarter 2024 in the JV. The utilization was solid 100% compared to 99% in Q2 '24. We're only a party of 4 vessels in the segment and have won under management. All vessels in these segments are our own contracts. On the next slide, we see that our fixed assets have increased from year-end 2024, mainly due to the investment in second newbuild vessel, which is currently being built at the Sefine in Turkey. Both new builds are treated as asset under construction. Our equity percentage is 62%, the same as at year-end. This reflects our solid balance sheet. Net interest-bearing debt by the end of the quarter was NOK 525 million compared to NOK 499 million at year-end last year. The increase is mainly due to payment of yard installment on the second newbuild. Net interest-bearing debt of our adjusted EBITDA in the last 12 months is 1.5. We are seeing a decrease in cash flow from operating activities for the first half of 2025 compared to the same period in 2024 from NOK 200 million to NOK 114 million. This is mainly driven by movement in the working capital. On the investment side, spending is mainly due to the investment in the second newbuild. Cash flow from finance is mainly due to payment of installments and interest, offset by contribution from other interest in the second newbuild. Cash balance at the end of the period is NOK 305 million and NOK 64 million of this is restricted. And now back to Helga for closing remarks.

Thank you, Lars. As a summary, we are highlighting the following: as always, strong utilization. We're having PSVs coming off legacy contracts in a long-term positive market together with newbuilds coming into a strong subsea market. We're noticing an increased opportunity for vessels in adjacent markets, we had no main class renewals in '25 and 1 in '26, and we have proceeded with a dividend distribution. Then over to Q&A.

Thank you, Helga. We have received so far 3 questions. First, Lars, will there be quarterly dividends going forward?

Well, this is up to the Board of Directors. They have an authorization to go up to NOK 0.50 per share until the next Annual General Meeting. With the dividend announced today, the remaining authorization is NOK 0.20 per share.

Thank you, Lars. One for you, Helga. Are you concerned about the PSV rolling off term contracts in the next quarters?

I think that the market for PSVs is looking positive for 2025, 2026 into '28. Also, all our PSVs are an attractive size and they also have capabilities like batteries and LNG for emission reduction. So we are positive in our ability to renew contracts.

Thank you. The last 1 we have is, how many options are left at the Sefine Shipyard?

We have 1 option left at the yard. And we continue to explore opportunities, but we will not trigger the option unless we have -- as before, unless we have a contract with a customer, a long-term contract with the customer.

Thank you.

And that concludes our Q2 conference call. Thank you, everybody, for joining. Wish you all a nice day.