TechnipFMC plc — Q2 2021 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2021. Amounts are in U.S. dollars. The February 16, 2021 spin-off of Technip Energies materially changed the company’s business and reporting perimeter; historical Technip Energies results are presented as discontinued operations, limiting direct comparisons.
Financial performance
- Q2 revenue: $1.669 billion, up 3.0% year over year. Service revenue rose to $913.4 million; product revenue declined to $708.8 million.
- Q2 profitability: Gross margin was 13.6%, versus 10.5% a year earlier. Continuing-operations loss attributable to TechnipFMC was $174.7 million, or $0.39 per diluted share. Net loss attributable to the company was $167.0 million, or $0.37 per diluted share. The quarter included a $146.8 million loss on the Technip Energies investment. Adjusted operating profit was $46.3 million and adjusted EBITDA was $144.3 million; adjusted diluted loss per share was $0.06.
- Six-month results: Revenue was $3.301 billion, up 3.1%; gross margin was 12.6%, versus 10.9%. Continuing-operations income attributable to TechnipFMC was $255.6 million, compared with a $3.412 billion loss in 2020. Net income attributable to the company was $201.2 million, versus a $3.244 billion loss. The 2021 result included $323.3 million of income from the Technip Energies investment; 2020 included $3.303 billion of impairment, restructuring and other expenses. Adjusted operating profit was $116.3 million and adjusted EBITDA was $309.5 million; adjusted diluted loss per share was $0.09.
- Segments: Q2 Subsea revenue was $1.394 billion, up 1.1%, with $72.4 million operating profit versus a $75.6 million loss. Surface Technologies revenue was $274.5 million, up 13.6%, with $12.9 million operating profit versus a $13.4 million loss. For the first half, Subsea revenue increased 5.7% to $2.781 billion; Surface Technologies revenue declined 9.0% to $520.0 million.
- Cash flow: First-half operating cash flow from continuing operations was $95.6 million, versus cash use of $415.6 million in 2020. Capital expenditures were $83.9 million. Investing activities provided $470.5 million, including $458.1 million from sales of Technip Energies shares. Financing activities used $955.8 million, largely reflecting debt repayment. Cash declined $414.3 million to $854.9 million.
- Debt and liquidity: Total debt was $2.478 billion and net debt was $1.623 billion at June 30, compared with $3.460 billion and $2.191 billion, respectively, at year-end 2020. The $1.0 billion revolving facility had $927.1 million available after letters of credit; the company reported compliance with its covenants.
- Backlog: Order backlog was $7.312 billion, up from $7.290 billion at year-end. First-half inbound orders were $3.282 billion, including $2.810 billion for Subsea.
Changes, outlook and risks
- Management attributed improved segment profitability to stronger execution, lower operating costs, increased activity and substantially lower impairment charges than in 2020. First-half Surface Technologies revenue remained pressured by lower North American operator activity.
- Management expected 2021 Subsea inbound orders to exceed $4 billion, citing offshore recovery, stronger front-end engineering activity and potential project awards. It expected at least 60% of projects under study in 2021 to include an iEPCI solution. For Surface Technologies, management expected completions-related revenue to outperform the market and approximately 65% of full-year segment revenue to come from international markets.
- Management estimated 2021 capital expenditures at approximately $250 million, excluding contingent spending for contract awards. It planned to sell its remaining Technip Energies stake in an orderly manner within a year and use proceeds to reduce net leverage. After quarter-end, it announced a sale of 16 million Technip Energies shares for gross proceeds of €179.2 million ($212.8 million); completion was expected around August 3, 2021.
- Risks include volatile oil and gas demand and prices, COVID-19 effects, contract execution and cost overruns, customer spending, supplier and joint-venture reliance, foreign exchange, and legal and regulatory exposures. The unresolved French PNF anti-corruption investigation carries a $70 million provision; a settlement could exceed that amount, and criminal proceedings remain possible if no resolution is reached. Maximum potential undiscounted payments under guarantees were $1.348 billion; management did not expect known contingencies to materially affect results.
Important facts to verify
- Separate recurring operating performance from Technip Energies investment remeasurement gains and losses, discontinued operations, and prior-year impairment charges.
- Assess cash conversion and working-capital movements, including the first-half increase in receivables and contract assets and decline in contract liabilities.
- Track debt, revolver availability, refinancing costs and the use of proceeds from further Technip Energies share sales.
- Monitor Subsea order conversion and project execution, Surface Technologies recovery, and the assumptions behind management’s 2021 outlook.
- Follow the PNF investigation, the adequacy of its provision, and other guarantees, legal matters and project contingencies.