Kentz bucks industry-wide trend with profit rise

Kentz achieved a double-digit percentage rise in earnings last year, in line with expectations, bucking the trend of rivals hit by falling profits as oil companies cut spending.

Kentz said today that it had proven resilient to weakness in the sector due to a spread of business across different regions including Africa, the Middle East and Australasia, as well as a mix of clients from national, global and independent oil firms. It also tends to take a more conservative approach to project risk than some rivals, with nearly 80 per cent of its backlog consisting of cost-reimbursable contracts where the risk lies mainly with the client. Executives at larger peers Petrofac and SNC-Lavalin have criticised this low-risk model as no longer viable, but it seems to have worked well for Kentz so far.

The company had a rollercoaster year in 2013 which saw it resist takeover approaches from two bigger rivals to later complete an acquisition of its own, buying Valerus Field Solutions, and expand its reach into the Americas.

"We fired on all cylinders last year ... We executed our strategy I think flawlessly," chief executive Christian Brown said.

Kentz reported profit before tax for 2013 of $118 million (€85.6m), up 12.6 per cent on the previous year, from revenue of $1.66 billion. The company’s shares were up 4 per cent in morning trade. Brown said he expected strong growth this year with earnings per share reaching $1, an increase of 47 per cent from 2013.

“As we look into 2014, we think we’ve got a great platform for another year of growth,” Brown said, adding the integration of Valerus Field Solutions was “working extremely well.”

Analysts responded favourably to the results.

“Very positive results from Kentz, with robust 2013 results and increased backlog and pipeline underpinning continued growth for 2014, against a backdrop of an industry under stress,” analysts at Numis wrote in a note to clients.

Kentz was one of the sectors best performing stocks last year, with its share price rising over 60 per cent while rivals like Saipem, Subsea 7 and Aker Solutions were struck by project delays and profit warnings.

Reuters