TTS Group has delivered positive operating results in all quarters of 2016, continuing the positive trend from 2015. The underlying operating profit (EBITDA) in fourth quarter 2016 was MNOK 33. TTS has an order backlog that covers more than 80% of the expected new-build turnover for 2017.
TTS has a continued improvement in underlying operations, with an underlying EBITDA year to date of MNOK 133, compared to MNOK 89 in 2016. Total turnover in the fourth quarter of 2016 was MNOK 758, compared to MNOK 842 in the same period in 2015. The reduction (10%) is particularly a result of reduced activity within the business units Offshore and RoRo/Cruise/Navy.
– We have successfully stabilized key business units and are proceeding well with our improvement program. Combining our ambition to maintain and grow market position and our continued focus on synergies and operational efficiency with a goal to reduce year-on-year operating cost with MNOK 100 across the Group, we expect to maintain our positive margins in a challenging market, says Toril Eidesvik, CEO of TTS Group.
Eidesvik states that the order backlog covering more than 80% of the expected new-build turnover for 2017, gives a good basis for our 2017 operations.
We expect reduced activity in 2017 compared to 2016, particularly due to short-term challenges within the car carrier and heavy lift segments. Although the market for Container/Bulk/Tank also remains challenging, TTS expects stable turn over in the 100% owned units, but somewhat reduced activity in the 50% owned Chinese companies. The market for ship-lifts remains strong. For the services sector, TTS see a large potential for further development of both the spare parts sales and the general service activity.
Business unit Offshore continues to deliver marginally positive operating results in the fourth quarter, which confirms the improvement from an operating loss of MNOK 50 last year to a positive break even this year. TTS still expects a weak offshore market in the foreseeable future, and have reduced the TTS Group's exposure towards the Offshore sector, which today represents around 7 percent of the turnover.
Restructuring of business unit
The business unit Multipurpose, General Cargo has experienced a low order intake in 2016. The turnaround of the heavy lift market and the development of the offshore wind installation market takes longer time than previously expected. Due to this, the business unit has reported impairment of MNOK 118, of which inventories MNOK 20, fixed assets MNOK 16 and goodwill MNOK 82.
- To reduce the cost base for the business unit and adapt the operations to the current market, we plan a ramp down of our German manufacturing setup. We announce a restructuring program for the unit. This will add restructuring cost of around MNOK 30, which will hit the first quarter 2017 result, Toril Eidesvik says.
More flexible organization
Toril Eidesvik informs that TTS Group in general will continue its efforts to develop a more flexible organization that can shift resources between segments, and thereby be better suited to scale activity by market changes.
- Despite a challenging market for marine equipment, we have a strong market position with a global presence, and a comprehensive and diversified product portfolio. Together with committed competent colleagues, this creates a strong platform for future growth when the market improves, she concludes.
2016 Q4 Interim Report