Aker Solutions ASA

OSE:AKSO

Earnings Call Transcript 2021-Q3

[Marianne Hagen]

Hello, and a warm welcome to Aker Solutions and the presentation of the results of the third quarter of 2021. I am Marianne Hagen. I head up Sustainability, HSSE and Communications in Aker Solutions. With me today, I have our CEO, Kjetel Digre; and our CFO, Idar Eikrem. They will take you through the main developments of the quarter in a minute.Our presentation today is also a live webcast, and you can download the slides on our web page. And the webcast will be made available for replay later today. After the presentations, we do have time for questions. [Operator Instructions]And with that, I leave the floor to you, Kjetel.

[Kjetel Rokseth Digre, Chief Executive Officer]

Thank you, Marianne, and I can also say a warm welcome to all of you. And perhaps add, you know that -- we know that the pandemic is not over at all, at least not globally, but actually starting to meet like this with people in the room is giving me a lot of energy. So let's hope we are back to normal fairly soon.Now let me take you through the highlights of the quarter. The overall message is that we continue on track with our targets and our transition journey. Overall, yes -- and firstly, the financial result shows that we are clearly on track towards our guidance for the year. We delivered third quarter revenue of NOK 7.3 billion and EBITDA of NOK 459 million, excluding special items, which shows that our gradual margin improvements quarter-by-quarter is on track.Secondly, we delivered yet another quarter of solid order intake of NOK 9.5 billion. This means we have now delivered 6 consecutive quarters of more than 1x book-to-bill, which is a strong achievement in our sector. Our backlog increased to NOK 48.4 billion at quarter end, which gives us good visibility for activity increase moving forward.And then thirdly, our transition journey is well underway. We are maintaining our strong position in oil and gas. And in parallel, we are growing within renewables and energy transition-related work.One highlight from the quarter was the award of the Sunrise HVDC transmission system in the U.S. We are very proud to be selected by Ørsted and Eversource for the first offshore wind farm in New York. When completed, Sunrise is planned to generate enough electricity to power close to 600,000 homes.Another highlight is that we have formed a consortium with Siemens Energy on Doosan Babcock to develop solutions for the growing U.K. carbon capture market. The consortium will work in collaboration with Aker Carbon Capture to supply its leading carbon capture technology.When it comes to reducing emissions, we know that the energy industry has an important role to play. Aker Solutions is committed to contribute to measurable change in emissions within the industry to help reduce climate effects, and we are committed to net zero by 2050. And then in our operations, we delivered another quarter of solid project execution. During the quarter, first gas was produced at Troll Phase 3, and this gas project has a very low breakeven and is delivering great value for the customer. On the Johan Sverdrup project, we delivered a large 500,000 -- no, not 500,000, 5,000-tonne topside module on time, on budget and with the right quality. This is the latest in a series of deliveries from Aker Solutions to Johan Sverdrup, and we are proud to be one of the key contributors to the huge field development of Johan Sverdrup. And it has provided enormous ripple effects for the entire industry and will produce large values for the society for decades to come.Another great achievement during the quarter was a record-breaking delivery of the Hod unmanned wellhead platform to Aker BP. Only 14 months after the first steel was cut, we delivered the completed platform despite the challenges imposed by COVID. And I'm really proud of our employees who have managed to deliver this great achievement.And I'm also happy to share that the major Jansz subsea compression project, which we won last quarter, is off to a great start. That's crucial for the success of that development. And within our segment for electrification, maintenance and modifications, despite, again, the pandemic, we have good progress on all our international operations, especially in Angola, in Canada and in Brunei.So now let's move over to order intake. During the quarter, we continued to win important contracts. As mentioned, we won more than NOK 3 billion contract for the Sunrise offshore wind project in the U.S. by Ørsted and Eversource. Our scope is to provide the HVDC system for the development, and this will be the first HVDC system for offshore wind in the U.S. This is an important milestone for our renewables business, confirming that our transition journey is well underway. And it also demonstrates an important fact, and that is that we are competitive in the U.S. market and that our solutions and capabilities are highly relevant for customers in the growing offshore wind industry.In our oil and gas business, we also secured several important awards during the quarter. One was the large topside modification contract by ConocoPhillips for the Tommeliten field. Combined with our previous subsea award, this contract means that we have been assigned an integrated responsibility for this field development. It really demonstrates how our unique combined topside and subsea offering is ideal for tie-back developments like this. And on tie-backs, you need to modify the existing topside infrastructure to enable the tie-back of the satellite subsea fields. And we can deliver this as a one-stop shop, and this will be increasingly important, particularly for the NCS moving forward.We also won important FEED contracts for Aker BP as part of the greater NOAKA field development called NOA Fulla. These FEEDs will be executed in our well-proven alliance models and are important confirmations for the expected activity increase on the NCS. And I'll come back to that later in my presentation.During the quarter, we also won a contract to provide the subsea production system for Kobra East & Gekko development for Aker BP. This is also tie-back and will be executed through our subsea alliance model with standardized equipment. And then we also experienced growth in scope on existing contracts during the period, mainly in the Renewables and Field Development segment.Now let's have a look at the tender pipeline and the general outlook. And overall comment is that our tendering activity remains high across all segments even after periods of strong order intake. This is obviously a positive sign. And our tender value is currently NOK 80 billion, and about 25% of this is related to energy transition business. And to repeat what I said before, even though this overview shows a lot of opportunities, we continue our disciplined and focused approach in terms of projects that we onboard. We focus on projects where we can create value for both customers and shareholders, and the projects need to have a solid strategic fit. And we work with aligned incentive mechanisms to create win-win situations by delivering quality and solid execution from our side. And we base our tenders on standardized products when possible and aim for repeat effects where this is relevant.Another important factor for us and really for the industry just now is the capacity dimension. We are doing our tender work in a planned and controlled way. We continuously monitor our ongoing utilization levels and the planning ahead and also discussing this in detail with our customers. We are also increasingly working with partners, both in consortiums, alliances and otherwise to manage capacity efficiently.And now as you know, the activity on the NCS is special and is expected to grow significantly moving forward. And I would like to highlight 3 large areas to be developed that fit our capabilities really, really well. And these are, firstly, the 2 developments, NOAKA and Wisting, and then the further development of the large Valhall area. These are great examples where we, as Aker Solutions, have a broad set of capabilities and complete system design ability, which really makes a positive difference for our customers.And then starting with the NOAKA development by Aker BP and Equinor. This is a large greenfield development which will include several topsides and a large subsea scope. And Aker Solutions has already been awarded the FEEDs for 2 topsides and the subsea production system for the NOA Fulla part of the field by Aker BP and partners and as well as the FEED for the electrification from shore for the entire development. These FEEDs represent the potential contract value of around NOK 12 billion for Aker Solutions, subject to final investment decision next year. And this field development will have extensive use of digitalization. And we're actually really lifting our digital toolbox to the next level together with Aker BP, Cognite and aiZe in this development.Then we have the Valhall area, which is being further developed. Valhall is a large field development with a total of 5 topsides and around 50 active wells. It has produced about 1 billion barrels since the production started in 1982, and it's one of the longest-producing fields in the North Sea. Since 2013, the Valhall field has been operated by power from shore, significantly reducing scope on emissions.For instance, the Hod part of the field where Aker Solutions played a key role just now will have basically 0 CO2 emissions during normal operations as a result of the solution of power from shore. And Aker BP is now looking to extend the life span of Valhall to 2060 with the ambition to produce another 1 billion barrels. This means that upcoming work on modernizing Valhall will require a series of initiatives to sustain production, including developing untapped reserves of different parts of the greater Valhall area. And this work again fits well with Aker Solutions' capabilities across the board, as it will involve new topsides and jackets, brownfield work, development of new and smarter wells and subsea tie-backs and decommissioning and recycling of old infrastructure. So as you probably understand, we see huge opportunities at Valhall moving forward.Finally, the Wisting field development by Equinor and partners. This is a large greenfield development in the Barents Sea up north and one of the largest upcoming industrial projects and initiatives in Norway going forward. And this development includes power from shore solutions to a large floater and the floater itself and a large subsea scope. And as you saw in the news recently, Aker Solutions has been awarded the FEED contract for the FPSO. And the FEED includes an option for the full task of the EPCI, which represents a potential contract value of between NOK 8 billion to NOK 12 billion for Aker Solutions, again, subject to final investment decision next year, as it is true for many projects in Norway these times.Equinor and the Wisting partners are focused on reducing carbon footprint of the production to the lowest extent possible. As part of Aker Solutions FEED, we are designing the FPSO to include an HVDC electrification unit to enable power from shore from day one of production.So in summary, these are 3 large multibillion kroner developments that will change the picture of the Norwegian Continental Shelf, and they play really well to our strengths, including our ability to offer standardized equipment where relevant. They will all have a strong focus on digital transformation through the use of our upgraded digital toolbox, the use of digital twins, data sharing, predictive maintenance and software applications to optimize production. And these important developments will be, again, important parts of the activity increase expected on the NCS moving forward. And we also see considerable opportunities for life of field work to support maintenance after the operations have started for these 3 developments.Now let's have a look at some of our ongoing projects. And as you can see on this slide, our transition journey is already well underway. This is not just something we talk about for the future. We are one of the few companies in our sector who are actually already executing several projects related to transition in the relevant energy verticals. And about 34% of our backlog is now related to renewables and low-carbon work. In fact, most of these examples, as you can see, are within renewables, and Aker Solutions is a pioneer in helping to realize these types of projects.For instance, the Hywind Tampen is the world's first floating offshore wind project. And Norcem carbon capture is the world's first full-scale carbon capture project for the cement industry. We are also executing Northern Lights, which is the first full-scale carbon storage project in the world, and we are involved in both the onshore and subsea scopes. And this project is a key enabler to realize more carbon capture projects in Europe.And then another area, offshore fish farming, is also an area where we see interesting potential. During the quarter, we delivered the first of 2 large fish farms to Norway Royal Salmon based on our own design.Now I want to say a bit more in detail about how we can help solve our customers' need to significantly reduce emissions from oil and gas production. And then a good example is the major Troll field operated by Equinor and partners. We can go to the next slide. This is one of the largest oil and gas fields in Norway. And to put that in perspective, it contains about 40% of all non-gas reserves on the NCS. And the annual export volume from the field corresponds to about 8% of the EU's total gas consumption. It has also been one of the largest fields on the NCS with a peak oil production of more than 400,000 barrels per day in 2002.The Troll Phase 3 project relates to the gas production from the Troll A platform, and then Aker Solutions was awarded a topside and subsea contracts for this project back in 2018. And now during the third quarter, a major milestones reached for our customer when the gas production started in August. And the Troll platform is powered from shore, which means significant reductions in CO2 emissions from the production itself. And the project that we have been part of delivering is one of the most carbon efficient oil and gas projects in Norway, and the emissions are only 0.1 kilograms per barrel, and that compares to the global average of about 18 kilograms per barrel.So at the same time, it is one of Equinor's most profitable projects ever. And this project clearly demonstrates what we can achieve in terms of Scope 1 emission reductions for oil and gas customers with electrification of the topsides. And that is really relevant for the next project in -- for the Troll area, and that is the Troll West electrification project.Aker Solutions won the contract for power from shore in the first quarter this year, and this contract relates to the oil production from the Troll B and C platforms. And we are now half a year into that project, and I'm happy to say that this project as well is progressing according to plans. And this project is estimated to cut CO2 emissions from the field by as much as 500,000 tonnes per year. And again, to put that in perspective, that is equivalent of removing 250,000 fossil fuel cars from the road per year and will cut about 1% of total emissions in Norway. So these are quite important numbers.And then these 2 projects are good examples of how we enable customers to reduce their environmental footprint. It will contribute to both company targets and national targets for reduction of CO2 emissions. And we see interesting opportunities to export these type of solutions also to other regions.So now if we then sum up my part of this. We have delivered another strong quarter, demonstrating that we continue on track with our targets and our transition journey. We are delivering on our strategy of being a leading execution partner for both existing oil and gas markets and in emerging energy industries. We secured high order intake, which provides a solid foundation for our growth targets moving forward.Looking ahead, we see increased market activity across all areas where we are relevant. And we expect increased project sanctioning next year in regions and segments where we have a strong position. Our high front-end and tendering activity, combined with our leading capabilities, makes Aker Solutions well positioned to take full advantage of opportunities ahead.And with that, I will hand it over to Idar so he can translate what I said into some more detailed numbers. Thank you.

[Idar Eikrem, Chief Financial Officer]

Thank you, Kjetel. I will now take you through the key financial highlights for the third quarter and our segment performance and run through our financial guidance. As always, all numbers are mentioned in Norwegian kroner. So let me start with the income statement.The third quarter revenue was NOK 7.3 billion, up from NOK 6.4 billion a year ago, driven mainly by the EMM and Subsea segments. This confirms that the activity increase we have guided for in the second half of this year as we continue to progress on our project portfolio. The underlying EBITDA was NOK 459 million, up from NOK 451 million a year ago. And the underlying EBIT was NOK 178 million, up from NOK 148 million a year ago. We ended the quarter with a net income, excluding special items, of NOK 101 million and earnings per share of NOK 0.22.Now moving to our balance sheet and cash flow. We ended the quarter with a good cash flow performance and solid financial position. Our working capital ended at minus NOK 666 million. Cash flow from operation was NOK 576 million, and our cash flow from investment was minus NOK 23 million. During the quarter, we invested NOK 156 million in our own bonds, reducing outstanding bonds from NOK 2.5 billion to NOK 2.3 billion. Net interest-bearing debt-to-EBITDA is robust at minus 1.3x, well below our leverage covenants at 3.5x. We ended the quarter with a net cash position of NOK 1.1 billion.Now over to the segments. For Renewables and Field Development, the third quarter revenue was NOK 2.5 billion, similar to the same period last year. The underlying EBITDA was NOK 89 million with a margin of 3.6%. Margins were somewhat impacted due to several of our projects are in early phases of execution without profit recognition at this time.As a reminder, some of the historical quarters you see on the graph had positive one-off effects from the former Kvaerner business.The order intake was very strong at NOK 5 billion or 2x book-to-bill. This was mainly driven by the major NOK 3 billion award of the offshore wind project, Sunrise, in the U.S. The activity level in this segment is expected to increase somewhat from the current levels as we will gradually increase our progress on recent awards. This segment is currently experiencing high tendering activity and is positioning for large upcoming opportunities.For the EMM segment, the third quarter revenue increased to NOK 2.4 billion, up from NOK 1.9 billion a year ago, driven by good progress on ongoing projects. The underlying EBITDA was NOK 126 million with a margin of 5.2%, up from 3.5% a year earlier. Order intake was solid at NOK 2.2 billion or close to 1x book-to-bill. And the backlog remains strong at NOK 18.6 billion. The activity level in this segment is expected to increase slightly moving forward on the back of ongoing work and our frame agreements.In the Subsea segment, the third quarter revenue increased to NOK 2.4 billion, up from NOK 2.1 billion a year ago, driven by increased progress on recent awards. The underlying EBITDA was NOK 336 million with a margin of 14.1%. This was driven by solid performance on ongoing projects in the period. Order intake was solid at NOK 2.5 billion or 1x book-to-bill, and the backlog in Subsea remained strong at NOK 18.5 billion. The activity level in Subsea is expected to increase somewhat moving forward from the current level as we will increase our progress on recently awarded work. The Subsea segment continues to experience high tendering activity, in particular on the Norwegian Continental Shelf and with a focused approach in active regions globally.Now over to order intake and backlog for the company overall. We had another quarter of strong order intake at NOK 9.5 billion or 1.3x book-to-bill. This means we have had 6 consecutive quarters with a book-to-bill above 1x. And year-to-date, we have delivered 1.5x book-to-bill. Our order backlog is now at NOK 48.4 billion. This means we have a solid backlog coverage moving forward, and it provides a solid foundation for our growth targets towards 2025. We also see that the share of our order book from renewables and energy transition is, including low-carbon solution for oil and gas production, is now at 34%, up from 8% a year ago. This demonstrates that our transition journey is on track.Now to sum up. In the third quarter, we continued to improve margins, continued to deliver strong order intake and maintained a solid financial position. This demonstrates that we are on track with our targets for revenue growth and cash generation moving forward. Based on our secured revenue for the rest of the year, we now increase full year guidance for 2021 revenue to around NOK 29 billion. EBITDA margins continue to be seen up from last year to about 6%.It is still early days regarding 2022, but based on our secured backlog and the current market activity, we see our 2022 revenue up 15% from 2021 at this point in time. The outlook for project sanctioning remains positive, and Aker Solutions is in an excellent position to take full advantage of these opportunities.Thank you for listening. That was the end of our presentation, and we will now take any questions you might have. Marianne, please help us with the Q&A, please.

[Kjetel Rokseth Digre, Chief Executive Officer]

[ Good ] numbers, Idar.

[Idar Eikrem, Chief Financial Officer]

Good numbers. Pleased with that.

[Marianne Hagen]

Thank you. And the first question goes to that point, and it's from Frederik Lunde. It says, "Congrats on a very impressive turnaround. You have a net cash position and a very strong visibility from the backlog and tendering. Are there any realistic alternatives to returning cash to shareholders at Q4?"

[Kjetel Rokseth Digre, Chief Executive Officer]

Yes. You can start on that, Idar.

[Idar Eikrem, Chief Financial Officer]

Yes. Frederik, it's an interesting question that we have faced a few times. And as we communicated before, our job is, of course, to delivering well on our ongoing projects. And this is yet another quarter where we have demonstrated that and to build financial robustness. And that, we have also done.And when it comes to our dividend and dividend policy, we will revert back to that on the fourth -- in the fourth quarter when we announce the full year results.

[Marianne Hagen]

And that is also the answer to the same question from Øystein Vaagen. And then the last question I have is from [ Renault Nicolas Pierre Andre ], and it's, "What is the potential of contracts linked to the development of Aker Carbon, Wind and Horizons?"

[Kjetel Rokseth Digre, Chief Executive Officer]

Well, the basic idea and the foundation for those companies were actually created within the frames of Aker Solutions. And now having spun those off and they're really creating excellent value and they are developing themselves into customers that are really important for us as supplier and a contractor, we see many tasks that are actually running from prior to the spin-offs, which is now currently ongoing. And when they are maturing into new areas, we are there to actually be part of both studying these options and be part of also of their technology agenda. So at sort of a high-level notes, those are important clients. We know that they are the ones that we can collaborate, integrate with, and there's a lot of opportunities together with them going forward.

[Marianne Hagen]

Thank you. And now more questions are coming in. So I have another question from Haakon Amundsen, and he has 2 questions, please. "Did you have any project completions or contingency release in subsea this quarter?" That's the first question. And the second one is, "Can you explain the movement in the value of your tendering from second quarter?"

[Kjetel Rokseth Digre, Chief Executive Officer]

Yes. I think just to the last one, we're not changing tendering strategy and the ongoing activities in that space. We have won quite some considerable contracts that has affected the numbers. And then there's also some projects that has been changed from the client side. But no big returns or changes in tendering strategy or the way that we are in operations in that direction.And then to the subsea question?

[Idar Eikrem, Chief Financial Officer]

To the subsea questions, first of all, we are extremely happy with the margins and the result that the subsea organization is producing these times. And that is -- and it's no sort of specific single items. It's just a solid performance in the entire portfolio of subsea that is contributing to very strong earnings and good margins.

[Kjetel Rokseth Digre, Chief Executive Officer]

Yes. And to the subsea north, you had -- if you look at the subsea area, we know that the tie-backs type of activities is going to increase going forward because of the nature of, for instance, the NCS. We know that technology in the onsetting is going -- is even more to a proven stage, and it's going to be relevant for so much more, and then also the SLS business being stable and predictable and profitable. So all in all, subsea area is doing great.

[Marianne Hagen]

Next question is from Jørgen Lande. And he says, "How do you see the potential for continued margin improvement in '22?"

[Kjetel Rokseth Digre, Chief Executive Officer]

Well, without commenting the history too much, I think we've been quite clear, both Idar and myself, from when we started last summer on our key focus. We have to make sure that our core activities are controlled and that we have both people and technologies learning cycles. That means that we're actually improving that core activity every day, all the time. And then on top of that, we will transform and develop into something more. So -- and the way that we're also onboarding projects now, strategic fit, making sure that we understand the risks and having control from day 1, that kind of discipline and the starting point of the core activity we have, in my mind, will result in improved margins going forward.Anything to add, Idar?

[Idar Eikrem, Chief Financial Officer]

No, I think it's very much in line with the story that was presented more than a year ago when we announced the merger. And it's also in combination with good cost control internally, focus on continuous improvement, so keeping a good track on the cost side as well as growing the top line without growing the cost in line with the top line growth. That will also contribute to improved margins over time and be a vital element in delivering what we announced at the time in NOK 1 billion free cash flow in average per year up to 2025.

[Kjetel Rokseth Digre, Chief Executive Officer]

Just want to add one thing. Over and above the numbers, our company is also extremely focused on creating win-wins, as I tried to say in my presentation. And the best way of earning money for us is to create win-wins and predictable execution for our customers. That is when making margins and profit feels the best, and that's our focus going forward.

[Marianne Hagen]

We have another related question from Kim André Uggedal. He says, "Was the 14% margin in subsea a reflection of completing legacy projects? Or is this the level we should expect to see also going forward?"

[Idar Eikrem, Chief Financial Officer]

Yes. I will just refer to my previous answer on that one. It's a very good and solid performance in the entire subsea portfolio. And when it comes to margins, we can't sort of promise 14.1% every quarter. But we will be in the range of sort of 12% to 15% range in subsea, at least for the coming few quarters.

[Marianne Hagen]

And Kim André has another question as well. And he says, "Can you share some more information on the Sunrise HVDC contract? How is your U.S. execution model? And are you partnering with a local yard?"

[Kjetel Rokseth Digre, Chief Executive Officer]

Well, I think if you look at the HVDC area, the way that we have been selected as a preferred contractor in partnerships with some other key suppliers is really talking to our history, how we have been delivering and the credibility we have around engineering and precise, predictable project execution. It's a different platform than what we do for oil and gas, but there's a lot of similarities. So when looking at this, we will use our engineering muscle, our project execution competence and also use our assets and yards. But we will do that as we do in oil and gas with models around prefabrication, so to make it as efficient and competitive as we need. And then that's the starting point, and it's really an excellent sort of pole position now having the opportunity to build the new Aker Solutions around opportunities like this. And we will learn a lot through this first phase, and we're already well underway with Ørsted on this project.

[Marianne Hagen]

Yes. There are several questions around the same kind of topics here. There's not one I don't expect you to have any good answers to. But how -- [ Charles Simons ] says, "How are the results being received in the stock market? And is there a very positive reaction? Or is it lukewarm?"

[Kjetel Rokseth Digre, Chief Executive Officer]

I don't know. Perhaps you know. But I think where we are now is that we're sort of gradually improving our company. No big jump sort of thrusts really, so that I hope that we see that we are gradually making sure that this company is stable, predictable, but also transforming the pace, pursuing opportunities that are really sort of ours to win. We have a natural space in the new energy verticals, and we are grabbing them. So we will grow this company, what we call it, stone by stone in Norwegian. So that's the process that we are right in the middle of.Do you have anything to add, Idar?

[Idar Eikrem, Chief Financial Officer]

No, I think that sums it up very well. It's in line with what we communicated a year ago, and we are doing it step by step.

[Kjetel Rokseth Digre, Chief Executive Officer]

Step by step was a good -- was a better version.

[Marianne Hagen]

I also have another tough question from Jonas Shum. He asks, "How are your contracts structured vis-a-vis inflation? Do you fear any impact from general cost inflation on margins?"

[Kjetel Rokseth Digre, Chief Executive Officer]

Well, that's so important. I had a note on the capacity and the way that we work that as both a risk but also an opportunity. We need to use ourselves in the best possible way. And then obviously, when we see an activity increase like this, we need to wind ahead into 1 to 2 years into the future and start creating security for the projects by having the right dialogues with both equipment suppliers and also secure things in -- within the raw materials. And having that radar is something that we work continuously with. We talk with our clients, and we are securing it through the proper mechanisms in the contract, making sure that the risk is shared and where it should be.

[Idar Eikrem, Chief Financial Officer]

Just to add to that one, of course, this is one that we are following closely. And as Kjetel mentioned earlier on, safeguarding and safe and excellent execution is the key to value creation going forward as well. And vital part of that is, of course, make sure that whenever we tender for a new project, a lot of the, let's say, prices that we submit to our customers are locked in, in our tendering phase already.

[Kjetel Rokseth Digre, Chief Executive Officer]

Yes. And perhaps tie in a couple of other sort of words that we keep on mentioning, standardization means a lot. That means that you know what to do in projects that are a bit ahead of you, and that is sort of an opportunity to secure and have sort of warm relations to the supplier market in a way that is, I think, is special and that we need to sort of grow further. So that is -- and also then working on portfolios rather than projects one by one with key clients like Aker BP and then also potentially Equinor is important to us.

[Marianne Hagen]

Then we'll round off with the last question, and it's from Daniel Thomson, and he says, "Well done on another strong quarter. How should we think about the phasing on the Renewables and Field Development portfolio and hence, the potential to improve margins somewhat within this segment, particularly given the high tendering activity that should lead to more early-stage work?"

[Idar Eikrem, Chief Financial Officer]

Yes. As I mentioned in my presentation, I've quite a few project that is currently in the early phase of development. And as we have communicated before, we are applying a relatively conservative approach saying that we are not taking in any profit in the early phase of new projects. We are normally monitoring those. And so the revenue is, of course, included in our figures, but no profit recognition in the early phases. That is a drag on the margins for the time being. And as we progress into fourth quarter and first half of next year, many of these project will then be at the stage where we also start recognizing profit.

[Kjetel Rokseth Digre, Chief Executive Officer]

Yes. And growing this is going to be according to our strategy, which is communicated according to the pace that we've said within the verticals that we should be and then also with some new customers but also with our existing ones. And the reason why I mentioned the last thing is that we are actually in this change journey together with some of our historically most important key clients, and we are doing that together with them. So that's sort of the framing of that growth within renewables.

[Marianne Hagen]

So this concludes the presentation of the third quarter results for Aker Solutions. Thank you all for joining us today.

[Kjetel Rokseth Digre, Chief Executive Officer]

Thank you.

[Idar Eikrem, Chief Financial Officer]

Thank you.