Subsea 7 stock edges up on strong first quarter revenue

Investing.com -- Shares of Subsea 7 (OTC:SUBCY) (OSLO:SUBC) inched up 0.4% following the release of their first quarter financial results, which showcased stronger-than-expected revenue and EBITDA, despite challenges such as significant planned vessel maintenance and negative foreign exchange effects.

The company reported a net income miss and an increase in net debt contrary to consensus expectations, which anticipated a reduction.

During the first quarter of 2025, Subsea 7’s net profit of $17 million fell short of the Bloomberg consensus estimate of $31 million, impacted by a foreign exchange loss of $28 million.

However, the operating profit of $77 million exceeded expectations by $16 million. The company’s EBITDA of $236 million, representing a 15% margin, surpassed the consensus estimate of $224 million, with revenues climbing to $1.5 billion, marking a 10% year-over-year (YoY) increase.

Subsea’s revenue growth was attributed to a 6% YoY increase in subsea revenue, reaching $1.3 billion, bolstered by high utilization levels of Pipe Laying Support Vessels (PLSVs) in Brazil and progress on projects such as Bacalhau, Mero 3&4, Búzios 8, and Búzios 9.

The renewables sector also contributed significantly, with revenues up 37% YoY to $245 million. The company’s vessel utilization rate improved slightly to 75% in the first quarter of 2025, compared to 73% in the same period of the previous year.

Despite the positive revenue and EBITDA results, Subsea 7 experienced a quarter-over-quarter (q/q) backlog decrease of 3% to $10.8 billion, after a first-quarter order intake of $879 million at a book-to-bill ratio of 0.6x.

The backlog includes "$4.8 billion for execution in the remainder of the year, we have a high level of visibility for 2025." This, combined with the first quarter’s revenue, accounts for 90% of the midpoint of the company’s 2025 revenue guidance.

The company’s post-IFRS16 net debt increased to $632 million from $602 million at the end of the fourth quarter of 2024, defying Bloomberg consensus expectations for a decrease to $493 million.

This was after a negative free cash flow (FCF) of $25 million in the first quarter, primarily due to an "unfavourable movement of $163 million in net working capital."

Subsea 7 reaffirmed its financial guidance for 2025, expecting revenue to be between $6.8 billion and $7.2 billion, with an adjusted EBITDA margin projected to be within the range of 18% to 20%.

The company also anticipates margins to exceed 20% in 2026, based on its firm backlog of contracts and the prospects in its tendering pipeline.

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