This is a summary of the second quarter fiscal 2008 earnings call as presented by FMC Technologies, Inc. (FTI) on July 25, 2007
Management:
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President and CEO: Peter D. Kinnear
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EVP and CFO: William H. Schumann, III
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EVP, Energy Systems: John T. Gremp
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Director of IR: Robert K Cherry
Key Investors Issues:
- Earnings at $105 million or 81 cents per share were up 49%.
- Reported revenues of $1.5 billion, were up 27% from $1.1 billion in 2007.
- The firm spent $81 million to repurchase 1.2 million shares of common stock.
Half Year Highlights:
- Earnings amounted to $187.3 million or $1.43 a share, up 39.8% from $134 million or 99 cents a share in 2007.
- Revenues rose 27% to $2.7 billion from $2.12 billion in the prior year.
Second Quarter Highlights
Earnings were $105 million or 81 cents, up 47 % from $72.8 million or 55 cents per diluted share in the prior-year as operating profit in Energy Production segment was up 50%.
- Operating profit in Energy Processing was up 23% over the second quarter of 2007.
- Energy Production revenue was up 31% from the prior year quarter on the strength of the subsea and surface wellhead businesses, with subsea revenue a record $779 million, up 35% from the prior year quarter.
- Even with the record revenue, the firm was able to maintain subsea backlog at $3.9 billion.
Inbound orders for the company totaled $1.4 billion, of which $1.2 billion was in Energy Systems.
- Backlog was $5.0 billion, including $4.6 billion in Energy Systems.
- In Energy Production, the operating margin was 11.1%, as compared to 9.7% in the prior year quarter.
In the Energy Processing segment, revenue was up 20% from the prior year quarter.
- The Fluid Control business, including WECO/Chiksan, remains solid with sales up 10% from the prior year quarter.
-. All of the other Energy Processing businesses had attractive sales growth quarter-over-quarter, with measurement leading the way growing more than 30%.
- The firm increased the operating margin to 19.4%, up from 19% in the prior year quarter.
FMC Technologies continues to see a trend towards more complex Subsea Systems and more equipment being deployed on the seabed as evidenced by awards.
- The outlook for Subsea Processing, especially separation, continues to be very positive.
- The need to address produced water and the subsea separation of gas from liquids is now evident in the North Sea, West Africa, the Gulf of Mexico and offshore Brazil.
- Petrobras typically integrates their subsea control systems on their manifolds, of which FMC currently has a majority market share for this technology. Subsea boosting is another strong area for the firm in Brazil.
The firm has delivered five electric submersible pump system and have another 10 subsea boosting systems in backlog.
- Increased produced water is a serious concern for many operators, including Petrobras.
- Another driver for the Subsea business in 2008 and beyond is the strong activity resulting from alliances and frame agreements.
- FMC Technologies has announced four Statoil Hydro orders to link over $220 million from its frame, entered a new alliance with Anadarko and renewed its alliance with Woodside in Australia, which by itself is expected to result in orders for over 80 subsea trees in the next five years.
Energy production sales were $948 million, up 31% over the prior year quarter, primarily due to the growth of subsea which was up 35%.
- Surface Wellhead also generated significant revenue growth of over 20% during the quarter.
- The energy production segment generated EBIT of $104.9 million, up 50% from the prior year quarter.
- Its operating margin was 11.1% for the quarter.
