18 December 2013, News Wires – France’s Technip is bracing for “exceptionally low” operating margins for its subsea division in the first quarter of 2014 due to what it called “zero-margin” projects in the Gulf of Mexico and a start-up of the Acu port facility in Brazil.
The engineering company did not elaborate Tuesday on its subsea difficulties or specify which projects were problematic in its US Gulf, but said the “tail of revenue” from those projects contributed to expected 5% margins for the upcoming quarter.
Technip said on Tuesday that margins for its subsea division are expected at around 5% because many projects being worked on during the quarter are long-term and not planned to generate revenue yet.
The company retains “a strong, profitable and diversified backlog,” it added.
Technip claims the tide is expected to turn after the first quarter, however, with the company expecting to realise between€4.35 billion and €4.75 billion ($5.98 billion to $6.53 billion) in subsea revenue for the year with margins of 12%.
“Opportunities for new project awards near- and medium-term continue, as we see it at Technip, to be widespread,” chief executive Thierry Pilenko said.
“This enables us to set realistic and achievable objectives for revenue and profit over the coming two years.”
Further subsea improvements are expected in 2015 with revenues above €5 billion and 15% and 17%.
Meanwhile in its onshore/offshore division, Technip for 2014 is targeting revenues between €5.4 billion and €5.7 billion with operating margins between 6% and 7%. “Modest growth” is then expected for 2015.
Technip was also expected to be among the companies hit hard by BP’s decision to nix a massive spar design for the second phase of its Mad Dog development in the Gulf of Mexico, but it did not report problems from that project to its plan for the next two years.