Moreld ASA (MORLD) Earnings Call Transcript & Summary

Good morning, everyone, and thank you for joining Moreld's Third Quarter 2026 Presentation. My name is Geir Austigard, Group CEO. And together with our CFO, Trond Rosnes, next to me here, I will take you through the quarter. Overall, quarter 3 was another strong quarter for Moreld. We delivered solid operational performance, particularly in Ocean Installer, strengthened our backlog through important contract awards and continue to maintain a strong balance sheet and liquidity position. The quarter also provides improved visibility into 2027. And based on both our financial performance and project outlook, we have raised our EBITDA guidance for 2026. With that, let's start with a brief introduction of the group. Most of you know Moreld well, so I will keep this slide brief. Moreld is a diversified offshore services group with approximately 2,000 employees, operations from 32 offices and around NOK 9.8 billion pro forma revenue for 2025. The group consists of 3 complementary businesses: Ocean Installer, Moreld Apply and Global Maritime. Ocean Installer is our largest earnings contributor by far and operates in growing subsea installation markets. Moreld Apply focuses on projects, maintenance and modifications, while Global Maritime provides marine, offshore and engineering consultancy services. Together, these businesses give us exposure across multiple offshore markets and create a diversified earnings platforms. Q3 was characterized by strong operational execution and improved visibility. We delivered a revenue of NOK 2.2 billion and an adjusted EBITDA of NOK 376 million, corresponding to a margin of 17%. As a result, we are raising our full year EBITDA guidance to the interval from NOK 850 million to NOK 1 billion. And as you can expect, Ocean Installer was the key earnings driver during the quarter, supported by high vessel utilization, strong project execution and important milestones across several projects. Our backlog remains strong following major awards, including Marine 1 award, providing improved visibility, not only into 2027, but also beyond. In Moreld Apply, we continue to transition to a lower activity environment. The organizational adjustment and cost measures have largely been completed and management attention is increasingly focused on execution, productivity and rebuilding backlog. Finally, our balance sheet remains strong. We ended the quarter with a cash position of NOK 1.2 billion and have maintained the quarterly dividend while launching a new share buyback program. Looking at the key figures for the quarter. As I said, revenue came in at NOK 2.2 billion and adjusted EBITDA of NOK 376 million. The year-to-date revenue then adds up to NOK 6.1 billion, while year-to-date adjusted EBITDA has reached NOK 612 million. Our cash generation remains strong. We ended the quarter with almost NOK 1.2 billion in cash and a net interest-bearing debt of only NOK 73 million, and that excludes leases. The backlog, for me, of course, a very important measure, remains at a high level of NOK 8.1 billion. While somewhat down from the record level reached in quarter 2, it continues to provide a solid foundation for future activity and reflects the strong project pipeline secured over the last 12 months. Overall, the figures demonstrate both strong current performance and our robust financial position. So now let's look at some operational highlights. Starting with Ocean Installer, the company delivered another exceptional quarter. Strong project execution, high vessel utilization and milestone achievements drove very strong margins. During the quarter, Troll Phase 3 was delivered first gas achieved on time. That was very important for our customer, Equinor, while key projects such as Balder continue progressing according to plan. The Marine Wave 1 award in this quarter or in quarter 3, further strengthened backlog to a record NOK 6.2 billion for Ocean Installer and also strengthened the company's future visibility. In Moreld Apply, results reflected lower market activity levels together with restructuring costs. The organizational changes we have talked about during the previous quarters now will be completed with a new CEO, Henrik Melsom, taking seat starting mid-November, so only a few weeks away. The company secured new awards and further expanded its opportunity set through activity in adjacent markets, i.e., outside of oil and gas, including defense, a contract in defense. Global Maritime experienced relatively stable activity, although probability was softer due to lower utilization of staff in selected business stream. To address this, an improved business model has been implemented to improve resource utilization and margins. We were also pleased to secure several important commercial wins for Global Maritime, including a long-term marine services agreement with ADNOC in Abu Dhabi. Now let's look a little bit more on the deep -- sorry, on the backlog. And I think it's fair to say that the backlog continues to be one of the key strength of the group. At NOK 8.1 billion, the backlog provides good visibility into our future activity. The development has primarily been driven by Ocean Installer, reflecting both strong market conditions, but also successful project awards. And over the last 12 months, we have secured several significant contracts, as you know. I've talked about that in the previous quarters, including Balder Next, Bacalhau and most recently, Marine 1 with Equinor. These projects strengthen our position in the attractive subsea markets and underpin activity levels well into 2027 and beyond, as I mentioned earlier in the presentation. While Moreld Apply backlog remains lower than desired, rebuilding it is a key priority and management is really focused on converting a broad opportunity pipeline into new awards. And we will come back to Moreld Apply in more details in the next quarter. There is a lot of activities taking place there, which I expect a positive outcome from. So from my perspective, this slide highlights the differing, I can say, market dynamics across our portfolio. For Ocean Installer, we continue to operate in a very attractive subsea market. Backlog is at record levels. Margins are strong, and the company continues to be invited, and this is important. The company, Ocean Installer continues to be invited to bid for large international SURF projects. And I think that is one of our strongest opportunity that we have in the group or in Moreld to even build a stronger future. So we, therefore, see significant potential for continued growth. And I'd like to mention one specific project. That is The Venus Project of these large projects that we are talking about. And let me be clear on that one, on The Venus. Ocean Installer is bidding for the project. The project is not yet awarded. We know that we have handed in a very, very good offer. And we also know that the Total that is the operator is negotiating still with the Namibian government for a final agreement. So we don't know the outcome, but we are certainly in the race. The picture is somewhat different for Moreld Apply, where activity in the maintenance and modification market in the Norwegian Continental Shelf has softened. Recent strategic studies and the defense-related awards that I talked about demonstrate that the improvement activities that we have done are gaining traction and helping broaden the company's opportunity base. So overall, the group benefits from having a super strong, I like to call it that, a super strong installation company, a subsea installation company with significant room for growth combined with exposure to several markets with different underlying cycles. This is a good position going forward. So with that, Trond, you take over to talk about the financial part of it.

Thank you, Geir, and good morning to you all. Indeed, a really strong quarter in terms of the financials. I will start on group level and then go through the various segments in turn. So as Geir also mentioned, revenue ended at NOK 2.2 billion and adjusted EBITDA at NOK 376 million, corresponding to an EBITDA margin of 17%. And just as a reminder, as I've also mentioned in previous quarter is that this EBITDA measure is exclusive of IFRS 16, meaning that the cash cost of the vessel leases, which is a significant cost for this group is included in this EBITDA number. The result reflects the closeout of several offshore projects and high vessel utilization in Ocean Installer and has delivered 95% of the group's EBITDA in the quarter. Moreld Apply and Global Maritime both had a softer quarter, and I will come back to each of them in a little bit later. Leverage ratio, as Geir also mentioned, very low at 0.1x with net interest-bearing debt excluding the leases of NOK 73 million at the end of the quarter and supported by a very strong cash generation that I will come back to as well. Year-to-date, revenue amounts to NOK 6.1 billion and adjusted EBITDA for the first 9 months at NOK 612 million. And also bear in mind that, that includes the negative first quarter result for the group. Before I turn to the segments, I would like to spend some time on explaining why our quarterly results vary as much as they do as this is also a question that we are frequently asked. From a Moreld financial perspective, there are 3 cycles at play. The first is the project cycle. On a subsea EPCI contract, a large share of the profit is recognized in the offshore execution phase and closeout. A quarter in which large scopes are completed, such as Troll Phase 3 in this quarter will therefore be a stronger quarter than a quarter in which the same project is in the earlier phases, for instance, the engineering phase. So that's the first one. Second one is the seasonal cycle. Historically, the winter months have been softer, and this could also be expected going forward as well, although we now have a larger presence internationally and in basins where the offshore season is opposite of the Norwegian Continental Shelf. And the third is the market cycle, where subsea maintenance and modifications and marine services each partly follow their own cycle. In practical terms, this means that the fourth quarter could be lower than the third. The guidance implies a fourth quarter in the range of NOK 240 million to NOK 390 million. And this is also why we maintain prudent liquidity reserves and focus on sustainable margins over time rather than on any single quarter. Turning then to the first segment, Ocean Installer delivered the majority of the quarter's result, as I already mentioned. Revenue came in at NOK 1.2 billion and EBITDA of NOK 359 million, a margin as strong as 29.5%. The results reflect high offshore activity and solid execution across the project portfolio. Both key enabling vessels were in operation throughout the quarter and a third vessel was also chartered in for a single project in the spot market. Profitability was particularly strong in the quarter, supported by the project completions and milestone achievements Geir also mentioned with the Troll Phase 3 as the most significant one. And this is the project phasing effect I referred to on my previous slide. And the margin for this quarter should, therefore, not be viewed as a new sustainable run rate in terms of margin going forward. But what is sustainable is the activity level. Ocean Installer's backlog stands at a record NOK 6.2 billion, following the Marine Wave 1 award. The vessels are more or less committed for the remainder of the year and visibility into 2027 is good. Turning to Moreld Apply, delivered revenues of NOK 789 million in the quarter with activity below both last year and previous quarters. This reflects lower volumes on key maintenance contracts and less projects in execution following the completion of Eirin and other large projects. EBITDA came in at NOK 10 million at a margin of 1.3%, which also includes downsizing costs taken in the quarter. And as Geir also mentioned, the organizational adjustments in Moreld Apply and cost measures have largely been completed. The new organizational model and ERP system are in place and the loss-making noncore subsidiary, Minox Technology was divested in September. Management attention is now directed towards execution, productivity and rebuilding the backlog with the frame agreement awarded by the Norwegian Defence Materiel Agency after quarter end as a first step into a new market. As activity recovers and the improvement initiatives take effect, a return to mid- to high single-digit EBITDA margins should be achievable. Global Maritime maintained stable activity throughout the quarter, driven by the execution of several marine operation campaigns, including the Tetraspar decommissioning project. Revenue was NOK 209 million, in line with the same period last year. EBITDA at NOK 8 million and an EBITDA margin of 3.8%. The lower profitability compared with the second quarter is primarily due to lower utilization of billable personnel in selected markets, geosciences being one example. Activity remains less predictable in part of the business exposed to the Middle East. The North Sea regional model has been implemented to support margins and contract wins together with several awards after quarter end, strengthened the backlog going into 2027. Then going over to the balance sheet and starting with the working capital. Just also as a reminder, as I've also talked about during previous quarter, we operate with a capital-efficient model, where working capital at a normalized level is negative. The main drivers are front-loaded milestone payments on our larger projects. And we also have a nonrecource factoring solution in place, both for Apply, Global Maritime and Ocean Installer. There is considerable variations from quarter end to quarter end on the working capital, but that depends on the timing of invoices, supplier payments and as well as customer prepayments. During the quarter, the working capital became less negative, primarily as a result of project-related timing effects, including the timing of supplier payments and other contract settlements. But the working capital remains within normalized level and is improved compared with the same quarter last year. Gross interest-bearing debt consists of the USD 130 million senior secured bond that we issued in February last year. That's equivalent to NOK 1.248 billion at the end of the quarter. The bond is unhedged and the weaker dollar has reduced the NOK value during the quarter. In addition comes the lease liabilities accounted for under IFRS 16, which relate to the vessel and office leases. The cash balance at the end of the quarter, NOK 1.175 billion, up from NOK 1.141 billion in June and includes NOK 107 million of customer prepayments. And together with the NOK 200 million unused credit facilities, total available liquidity amounts to NOK 1.375 billion. Briefly on the cash flow bridge. As mentioned, starting the quarter with NOK 1.141 billion in cash. EBITDA contributed with NOK 369 million. We have this negative swing in the working capital of NOK 150 million. We have paid taxes of NOK 17 million now in Q3. We have CapEx of NOK 27 million, where the majority is connected to the ERP upgrade in Apply in addition to some improvement projects. And we have paid NOK 61 million in interest on our bond. We have semiannual payments. So in -- we are paying the interest in Q1 and in Q3. And that brings the cash balance to NOK 1.175 billion, which is a net increase of NOK 34 million despite the interest payment and the dividend we paid. And cash generation is a natural segue to distributions. And let me start with what we have already delivered. We have now paid a quarterly dividend for 6 consecutive quarters, close to NOK 500 million in total. The Board has approved a dividend of NOK 0.5 per share for the third quarter, approximately NOK 88 million with ex dividend date on 9th of November and a payment expected on or about the 17th of November. What is new this quarter is that the Board has also approved a share buyback program of up to 5 million shares capped at NOK 100 million, which in total, if the full frame is used, is equivalent to NOK 0.56 per share. And the program commences today and runs under the authorization from the general meeting expire, which is June 30 next year at the latest. The intention behind the program is to cancel the repurchased shares. So this represents a permanent reduction of the share count. So taken together, the dividends paid to date, the dividend just declared and the buyback program, if fully utilized, amounts to approximately NOK 660 million returned or committed to shareholders since the listing. And this program sits within the capital allocation principle shown to the right on the slide. We prioritize a robust balance sheet first. We have the cash dividend as a base select -- we do selective investments in profitable growth and only profitable growth, and we -- and excess cash is returned to our shareholders. With that, I will hand the floor back to Geir for his final remarks.

Thank you, Trond. So -- here we go. So let's have a look ahead. The outlook has improved and why is that? Well, the strong third quarter performance combined with increased backlog visibility supports raising our 2026 EBITDA guidance. Of course, that is a very important feature for the future. But also Ocean Installer continues to execute exceptionally well and benefits from the strong underlying subsea market. The backlog, the strongest backlog Ocean Installer has ever had, as I said, provides a solid basis for activity during next year, 2027 and beyond. And the ongoing tendering activity creates additional upside potential. The combination of this and a strong balance sheet and the liquidity position, this gives confidence in both our operational outlook, but also on our ability to continue shareholder distributions. A more detailed guidance for 2027 will be provided together with our quarter 4 results in our presentations in February. That concludes our presentation, and we open up the floor for questions.

Great. I'll start with a couple of questions for Geir. So let's start with the first quarter this year. You had one vessel for class renewal hitting the EBITDA of the first quarter. Can you update on when one of the vessels will see a similar class renewal? Is that planned for next year, for instance?

I don't have the exact date. There is a 5-year cycle. So that means there's 4 years for the one that was out now in the beginning of this year. As far as I remember, we had a the classing approximately 2 years ago for a normal mission. So that should mean that there is about 3 years to the next classing. But I don't have the exact date there.

All right. Moving on to the next question. It's linked to the Marine Wave project for Equinor. So Ocean Installer were very successful in the first wave. And what is your expectation around timing of Waves 2 and 3? And do you have any details on the work scopes of those waves compared to Wave 1? And what's your level of confidence in securing these new contracts?

Yes. Wave 2 is going to come out very soon or it has maybe come out. I'm not sure, but I know it will come out as late as I heard it was early next year. We know that Ocean Installer has been able to deliver a very competitive bid through very efficient use of the vessel days. And that has given us a good position. There is, of course, several parties that will bid for the Wave 2. And I am sure that Equinor will not award everything to one company. That is unlikely. But I think the chances are very, very good for Ocean Installer to secure future jobs also. But you never know. That is impossible to answer, and I don't want to speculate in the outcome.

Next question, let's move on to Moreld Apply. So -- and the outlook for 2027. So Ocean Installer have delivered excellent margins in the Subsea segment, while Apply has been operating with lower margins for the last quarters. Given the recent framework agreement with the Norwegian Defence Materiel Agency, other opportunities you're working with, how do you view Apply's capability to lift their overall margins and activity levels into early 2027?

Yes, that's a very good question. And Trond touched upon it. He said that we would -- should be able to see margins in the mid- to the higher single-digit percentages. So I think that's the best we can feedback for the time being. We do see some interesting opportunities coming into the future. And I want to be clear on one thing. We have an option for extension on what is called the FLX contract for the Statjord locations or installations. Since we have not gotten that extension and that discussion with Equinor will have to start very soon now. We have a very major potential of backlog should we have an extension. But I want you all to be aware that, that extension has not been taken in on order backlog. That expires in August next year. So that is one very important activity. And then there is also -- we know that there will be -- we have talked a lot about the EMOD/EPRO contract for Apply. We know that now there will be activities, major activities coming for bidding. There has been no bids coming out for almost half year, and that's starting up again now. So there are definitely opportunities in the current areas of Moreld Apply, and there are also good opportunities in new segments that the company is working on. And I also want to repeat Henrik Melsom coming in as the MD as from mid of this month will also contribute to a kind of a change in direction for the company that is needed.

Great. You mentioned The Venus Project. So let's move back to Ocean Installer. TotalEnergies recently stated during the African Energy Week that the commercial negotiations regarding the Venus field in Namibia are drawing out in time and warning that delays will increase CapEx. How is Ocean Installer securing the validity and protecting the margins of its submitted tenders should the FID slide into next year?

I cannot comment on those details. The only thing I can say is that we are -- we have secured capacities to continue having a valid bid. I don't want to comment on anything else on margins or strategies, that's confidential.

All right. Final question for Geir. Yesterday, CADE concluded its review of the Subsea7 Saipem merger in Brazil. Do you see any opportunities or challenges for contractors such as Ocean Installer arising from this decision and particularly thinking of the Seven Borealis and that vessel is being released into the Brazilian market.