Kentz Corporation Limited Trading update - 14 January 2011
London, 14 January 2011 – Kentz Corporation Limited (“Kentz” the “Company”), the holding company of the Kentz engineering and construction group (“the Group”), releases the following trading statement ahead of its full year results for 2010, expected to be announced in late March 2011.
Kentz is pleased to report the strong performance reported at the time of the Interim Results in September 2010 has continued through the second half of 2010 with significant natural growth from current contracts and increased demand for our services across the three Global Business Units (GBUs); Engineering, Procurement and Construction (EPC), Construction, and Technical Support Services. Following a very strong fourth quarter performance we now expect that revenues and profits for 2010 will be significantly ahead of current market expectations for the year.
- Backlog at the end of the year was US$1,600m, in line with the level reported at the half year and up from US$1,497m at the end of December 2009
- In addition we have received letters of intent, not yet converted to backlog, and new orders from our clients in 2010 together totalling a further US$25m
- Total order intake to backlog between January and December 2010 was US$1,253m
- Natural growth on existing orders represented 39% of the total order intake for 2010
- The EBIT and PBT margins for 2010 are expected to be in line with market expectations
Hugh O’Donnell, Chief Executive Officer of Kentz Group, commented:
“I am pleased to report that Kentz has finished the year in a very strong position. Despite the challenges within the global market place, the Kentz strategy has delivered significant growth through the globalisation of our Business Units. Pricing pressure in the Middle East caused some delay to EPC projects in the first half of the year, but a number of these projects are moving ahead now and we have seen a substantial uplift in activity in the second half.
“Kentz continues to deliver projects in challenging and remote locations and this period has seen us add new geographic areas to our operations including Papua New Guinea, the Dominican Republic and Iraq. Importantly, these projects are with existing Kentz clients and our focus on delivery for core customers has proven to be the right approach; with the signing of two new framework agreements with ExxonMobil and Shell during 2010. Natural growth in current contracts has been a continuing feature of our business and coupled with a growing number of longer term opportunities gives us confidence that the outlook for 2011 will be ahead of our previous expectations.”
Engineering, Procurement Construction (EPC)
Throughout 2010, we have continued to expand the global footprint of our EPC operations through the award of contracts in new geographic areas, including Papua New Guinea and Iraq as well as continued growth in existing areas, particularly in Australia, Qatar and Southern Africa.
Kentz now has five engineering centres of excellence servicing our project requirements across the Group, including a specialist telecommunications facility in Henderson, Australia. This office is servicing the AUD$150m EPC telecommunications package for the AUD$43bn Gorgon LNG project, which calls for state-of-the-art telecommunications technology due to the remoteness of the site and its susceptibility to cyclones.
We continue to develop our Process EPC capabilities through the Kentz Oil and Gas Global Process Systems joint venture and have achieved good progress on the 30,000 barrels per day oil production facility in Yemen. This project utilises Kentz’s strengths in process engineering and remote project execution.
Kentz has maintained its position in the Middle East market through a number of niche EPC packages valued at approximately US$250m including; a contract to replace two existing glycol regeneration trains at Qatar Petroleum's (QP) Fahahil Stripping Plant in Dukhan, Qatar; the Laffan Refinery fuel storage and distribution facility in Qatar; gas turbine generation for Zadco in Abu Dhabi; sea water cooling replacement for Keyma in Saudi and another telecommunications project at Halul Island for QP.
A contract to design and build the construction camp at the Hides Gas Plant for the ExxonMobil operated Papua New Guinea LNG project is progressing well. Design for this project is being undertaken in our engineering offices in Doha, Qatar and pre-fabrication is underway at production facilities in Dubai.
EPC continues to form the largest part of our pipeline and we see significant opportunities for this Global Business Unit going forward.
Construction
Despite a slowdown in the Middle East construction market, Kentz has continued to see strong demand for our core construction electrical and instrumentation (E&I) services particularly in Southern Africa and Australia. In addition, newer markets such as Madagascar and Sakhalin Island have demanded a more complete range of Construction services including structural, mechanical and piping. We have also expanded into the Dominican Republic on a leading minerals project.
A US$69m contract for the Vale Moatize Coal Project in Mozambique, to provide structural, steel, mechanical, piping, electrical and instrumentation erection work for the coal processing plant, is progressing well. During 2010 Kentz was also pleased to receive a further contract award in Madagascar, where we have a strong track record of utilising local labour force. The US$30m contract was awarded by SNC-Lavalin on the Ambatovy Nickel Project in Madagascar, which is set to be amongst the largest long-life nickel projects in the world with an annual capacity of 60,000 tonnes.
Elsewhere in Africa, Kentz is proud to be involved in the mega Medupi power station, a greenfield 6 x 800MW Coal Fired Power Station that forms part of a US$12bn investment programme by the South African Power Supply and Utility Group Eskom. Our US$250m contract is with GEA Energy and includes the procurement, detailing, shop fabrication and installation of approximately 36,000 tonnes of steel structure and plate work, 40,000 tonnes of mechanical equipment and 1,800 tonnes of piping over a four and half year period.
Longer term contracts add to the visibility of work and the Construction backlog of work was also boosted during the year with the award to Kentz E&C of the Site Wide Specialist Instrumentation contract for the Pluto LNG Project in Karratha, Western Australia. This brings the combined value of work secured to date on the project to in excess of AUD$120m and we see significant new opportunities for our Construction business in Australia, both in LNG and the mining and metal sectors.
Technical Support Services
There has been significant natural growth in the Technical Support Services division during 2010 particularly in challenging areas where existing Kentz teams are delivering for our clients.
The Technical Support Services business provides high value services across the life cycle of the project, from the front-end engineering and design phase (FEED) through to commissioning and start up. This has seen us involved in the final stages of commissioning of the mega Shell Pearl gas to liquids project in Qatar.
In addition we have recently secured a number of contracts with core clients for commissioning services on LNG liquefaction and re-gasification facilities and early production systems, and see further opportunities as LNG developments come on stream between 2011 and 2013.
Kentz’s successful track record in completions and commissioning contracts has led to a greater number of opex opportunities with key clients. This year we have combined our production service offering under the Asset Enhancement Services group encompassing; brownfield engineering services, maintenance and turnaround, and operations support.
Following the year end we have announced the award of a framework agreement to provide engineering design, construction supervision and procurement services for plant changes and projects by Qatar Shell GTL Limited at Ras Laffan Industrial City, Qatar.
In August 2010, Kentz successfully completed the maintenance turnaround programme for the Chayvo processing facilities in Sakhalin for Exxon Neftegas Ltd. The contract, worth approximately US$25m to Kentz, involved the front end planning and execution of the plant shutdown on schedule.
Technical Support Services contracts do not typically sit in our backlog, but asset enhancement contracts have started to give greater visibility to this business line as they tend to be longer term, giving certainty of operations and earnings. We see significant opportunities to grow this business, where EPC and Construction teams have built relationships with our core clients.
Group cash position
The Group’s cash position remains strong and continues to provide a sound financial base from which to support our growth plans; both through acquisition and the expansion of our Process EPC offering. Net cash at the end of December 2010 was approximately US$200m, up from US$168.3m as reported at December 2009, this cash balance includes certain cash advances from clients.
Safety
The health and safety of our employees is of paramount importance to Kentz and to our clients. During 2010 we delivered 43,000,000 man-hours of work on projects in 27 countries worldwide, with a TRIR (Total Recordable Incident Rate) ratio of 0.17.
This is in the top tier of the industry and was achieved through an unrelenting focus on our nine habits of safety leadership, safe behaviour programmes and daily safety observations.
Our workforce during 2010 was an average of 10,700 employees worldwide.
For more information about Kentz please refer to our website www.kentz.com or contact
Kentz Corporation Limited
Tel: +44 (0)20 3159 4003
Elizabeth Rous
Catríona Nugent
Evolution Securities Limited (Nomad and Broker)
Tel: +44 (0)20 7071 4300
Rob Collins
Chris Sim
Tim Redfern
About Kentz
Kentz is a global engineering specialist solutions provider, which serves a blue chip client base primarily in the oil and gas, petrochemical and mining and metals sectors. It is listed on the AIM market of the London Stock Exchange (symbol: KENZ). In the year ending December 2009, the company generated revenues of $704.7 million and profit before tax of $44.5 million.
Kentz has over 10,000 employees in 27 countries. Its three main business lines are; specialist engineering, procurement and construction (EPC) services, construction, and technical support services. It has a proven track record of delivering mechanical, electrical, controls and instrumentation engineering, construction and management services in some of the most remote locations on earth.