Subsea 7 SA ((SUBCY)) has held its Q4 earnings call. Read on for the main highlights of the call.
Subsea 7’s recent earnings call painted a picture of strong growth and optimism tempered by some financial challenges. The company reported a significant increase in EBITDA and a robust order backlog, signaling positive future performance. Achievements in the renewables segment and an increased dividend reflect a confident outlook. However, high tax rates, increased depreciation, and foreign exchange losses were noted as areas of concern.
Record Full Year EBITDA Growth
Subsea 7 achieved a remarkable full year EBITDA of $1,090 million, marking a 53% increase. This growth was driven by a 14% rise in revenue and a 390 basis points margin expansion, underscoring the company’s strong operational performance.
Strong Order Backlog
The company reported a substantial order backlog of $11.2 billion at the end of the year. With an order intake of $8.2 billion for the full year, up 10% year-on-year, Subsea 7 is well-positioned for continued growth.
Renewables Segment Performance
Revenue from the renewables segment reached $1.2 billion, a 29% increase year-on-year. The adjusted EBITDA margins in this segment improved significantly from 10.8% in 2023 to 15% in 2024, highlighting the company’s successful expansion in renewable energy.
Dividend Increase
Reflecting confidence in its future performance, Subsea 7’s Board proposed a $350 million dividend for 2025, a 40% increase from the previous year. This move underscores the company’s commitment to returning value to shareholders.
Positive Outlook for Brazil and Turkey
Subsea 7 reported continued strong activity in Brazil and the successful completion of Phase 1 in the Sakarya gas development in Turkey, with further phases underway, indicating promising prospects in these regions.
High Effective Tax Rate
The company reported a high effective tax rate of 41%, which is expected to moderate to between 40% and 45% in 2025. This remains a key area to watch as it impacts net profitability.
Increased Depreciation Costs
Subsea 7 anticipates an increase in depreciation costs to between $700 million and $720 million for 2025, up from $645 million in 2024, reflecting ongoing investments and asset utilization.
Foreign Exchange Loss
A net foreign exchange loss of $69 million was reported in Q4, driven by currency movements. While this was a non-cash loss, it is expected to reverse, indicating a temporary financial impact.
Higher Lease Payment Expectations
The company expects an increase in lease payments for 2025, potentially reaching the upper end of the $200 million range, which could affect cash flow management.
Forward-Looking Guidance
Subsea 7’s guidance for 2025 includes expected revenue between $6.8 billion and $7.2 billion, with an adjusted EBITDA margin ranging from 18% to 20%. Capital expenditure is projected to be between $360 million and $380 million. The company also noted that the first quarter of 2025 will involve 600 days of planned maintenance across several vessels, which is higher compared to the previous year.
In conclusion, Subsea 7’s earnings call highlighted a strong performance with a positive outlook, driven by significant growth in EBITDA and a robust order backlog. While the company faces challenges such as high tax rates and increased depreciation, its strategic focus on renewables and regional growth in Brazil and Turkey positions it well for future success.