Neptune Confirms FY2010 Earnings Guidance Following Stronger Second Half Performance

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  • Full year normalized* EBIT expected to be between $5.5 million and $6.5 million
  • H2 FY 2010 revenues expected to be $91 million. This is up 8.3% from H1 2010 reported revenue of $84 million
  • Increased tendering activity across all markets
  • Increased IRM activity expected following Gulf of Mexico oil spill
  • NMS continues to pursue longer term recurring revenue generating contracts
  • Further strengthening of the management team with the appointment of a Regional Vice President for Asia and the Middle East

Neptune Marine Services Ltd (ASX: NMS) today announced that it expects to report normalised earnings before interest and taxes (EBIT) for the year ending June 30, 2010 of between AUD$5.5 million – AUD$6.5 million. The performance from February to June 2010 is expected to generate normalised EBIT of between AUD$6.5 million  - AUD$7.5 million.

The result represents a significant improvement in performance in the second half of FY2010 compared to the first half given the normalised EBIT for H1 FY2010 was $0.8 million (reported EBIT for H1 FY2010 was AUD$0.3 million). This confirms Neptune’s recovery in profitability during the second half of FY2010 and the expected return to growth from FY2011 onwards as announced by the company on 21 January 2010.

The improvement during the second half of FY 2010 is largely attributable to:

  • Increased activity in the Australian offshore energy industry due to the development of major LNG projects in Western Australia, and in particular, the commencement of primary onshore construction.
  • Contract awards and increasing tender activity in the Middle East resulting in improved vessel utilisation rates.
  • Improved performance in the United States as a consequence of an increasing industry focus on Inspection, Repair and Maintenance (IRM) requirements expected to be further highlighted by the recent Deepwater Horizon incident in Gulf of Mexico.
  • Depreciation of the Australian dollar against the US dollar.

Following a significant softening of activity during the first half of FY2010, Neptune is encouraged by the turnaround in profitability and earnings during the second half.

*Net of IFRS adjustments.

Neptune’s Managing Director and CEO, Christian Lange acknowledged there was evidence of both improved trading conditions, particularly in Australia and the Middle East, and an increasing emergence of prospects across all of its operating locations. “Our performance from February 2010 reflects a significant turnaround in profitability as a result of stronger conditions in our key markets, with the US in particular showing signs of significant recovery and improvement,” he explained.

“Additionally we are seeing a marked increase in tendering activity, particularly in the last few months, as the subsea construction and installation phases on some of the North West Shelf oil and gas projects come into play. On the Gorgon Project for example, we are currently providing support services to some of the civil construction works and we anticipate our involvement and scope of services will continue to expand as the construction of the project’s downstream components progresses.

“The Middle East is also an exciting region for us and the successful completion of our first phase of work for Qatargas has resulted in our tendering on significant opportunities which are pending. All of these factors bode very well for Neptune’s ongoing development into FY2011 and beyond,” he added.

Neptune will update shareholders when appropriate on any material contract awards and extensions and will provide further details on its FY2011 outlook when it reports full year earnings in August.

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