Earnings call transcript: Akastor ASA Q2 2025 highlights offshore strength

Akastor ASA’s recent earnings call for the second quarter of 2025 revealed a strong financial position and promising operational performance, particularly in its offshore segment. The company’s stock responded with a 1.15% increase, closing at 12.30 USD, reflecting investor optimism. With a market capitalization of $333.17 million and an attractive P/E ratio of 1.88, InvestingPro analysis suggests the stock is currently undervalued. Despite challenges in the North American land market, Akastor’s strategic focus on offshore equipment and services appears to be paying off.

Key Takeaways

• Akastor ASA maintains a strong net cash position, with no drawn corporate facilities.
• High revenue utilization rates for AKOFS Offshore vessels, with over 90% utilization.
• Potential share buyback program under consideration to enhance shareholder returns.
• Macro uncertainty and weak North American land market pose challenges.

Company Performance

Akastor ASA’s performance in Q2 2025 was marked by a robust offshore segment, with AKOFS Offshore vessels achieving high revenue utilization rates. The company’s strategic focus on offshore and aftermarket equipment has positioned it well in the current market environment, despite challenges in other areas, such as the North American land market.

Financial Highlights

• Total net cash position increased by SEK126 million to SEK145 million.
• Consolidated revenue: SEK79 million.
• Consolidated EBITDA: SEK9 million.
• Book equity value: NOK 20 per share.
• Dividend paid: NOK 0.25 per share.
• Net capital employed decreased by SEK147 million.

Outlook & Guidance

Akastor ASA is exploring exit opportunities and potential share buyback programs to return value to shareholders. The company remains optimistic about the offshore market for 2026-2027, although it acknowledges the current macroeconomic uncertainties and weak North American land market. InvestingPro data indicates analysts expect a sales decline in the current year, with the stock typically trading with low price volatility (Beta of 0.21). These are just 2 of 12 valuable ProTips available for Akastor on InvestingPro.

Executive Commentary

CEO Karl Erik Kjersta emphasized the company’s strong financial position, stating, "We are currently in a strong net cash position with no drawn corporate facilities, enabling us to time transactions when values are attractive." CFO Tom Mackie highlighted the long-term potential in the offshore market, noting, "Despite a little bit of weakness, our customers see a very bright future offshore and are continuing to invest."

Risks and Challenges

• The weak North American land market could impact future revenue streams.
• Macro uncertainty may affect short-term spending and investment decisions.
• Decreased net capital employed could signal potential operational challenges.

Q&A

During the earnings call, analysts focused on Akastor’s growth strategies for HMH, potential shareholder distribution methods, and the company’s approach to potential share buybacks. These discussions reflect investor interest in the company’s long-term strategic direction and financial health. For deeper insights into Akastor’s valuation and growth prospects, access the comprehensive Pro Research Report, available exclusively on InvestingPro, which provides detailed analysis of the company’s financial health, valuation metrics, and growth potential.

Full transcript - Akastor ASA (AKAST) Q2 2025:

Ivan Poskaya, CFO, Akastor: Good afternoon everyone and welcome to the presentation of Akastor’s Second Quarter Results. My name is Ivan Poskaya, CFO of Akastor, and I’m here today together with our CEO, Karl Erik Kjersta. We’re also pleased to have our colleagues from HMH joining us from Mr. Tom Mackie, CFO and Mr. David Bratton, SVP Finance.

We’ll start with some key highlights from Kalle, followed by an update on Age Mage from Tom and David. After that, I’ll walk you through Alcaster’s consolidated financials before handing it back to Kalle for some closing remarks. As always we’ll wrap it up with a Q and A session. Please feel free to submit your questions at any time during the presentation using our web based Q and A tool. With that, I’ll hand it over to Karl.

Please, Karl.

Karl Erik Kjersta, CEO, Akastor: Thank you, Ewyn. And good afternoon and good morning to our U. S. Participants and thank you to everyone for joining us this afternoon. Let us start with some key highlights for the second quarter at slide number two.

We are pleased to announce a cash distribution of NOK0.25 per share to our shareholders supported by strong cash flow in this quarter. This is aligned with our communicated strategy to return excess capital to shareholders while maintaining a sound capital structure. Continues to deliver robust financial performance despite reduced offshore drilling activity and softer demand for spare parts. Reported an adjusted EBITDA of US36 million dollars and a margin of 17.7% in the quarter. HMH is continuing to keeping its S1 filing with the SEC updated and timing of a potential launch continue to be dependent on market conditions and sentiment.

The book value of our shareholding in HMH remains at around 70% of our total net capital employed, with a book value of NOK3.4 billion per end of the quarter and NOK 12.3 per Akasto share, somewhat down from last quarter due to currency effects. OKOS Offshore. Building on several years of strong operational performance, including this quarter, Arcos Offshore is steadily renewing its order book. This includes the previously announced new contract for Arcos Seafarer and more recently Arcos Santos, which has been nominated for an award for a four year MPSV contract with Petrobras. Both these contracts will have positive effect on 2026 results and reflect improved market condition through a stronger day rates than the current terms.

Our book value of AKOS was around NOK0.3 per customer share at the end of the quarter. We consider this book value to be conservative measure that it does not fully capture the company’s underlying asset values. We continue to see meaningful upside potential and remain focused on ensuring that this is increasingly understood and reflected over time. TDV Offshore. Unfortunately, the announced sale of Skandi Peregrino vessel was canceled as the current charter did not agree to noviate the associated charter contract.

However, all three DDV vessels are now on term contracts in Australia and we see interesting opportunities for all vessels both when it comes to possible asset transaction and in terms of new charter contract post existing solid backlog. The book value of our investment in DDB Offshore is NOK1.3 per Akasto share based on an average book value per vessel of about US11 million dollars As you might recall, we received about 3,000,000 shares in Odfjell Drilling in May 2024 through the execution of a warranty agreement that we established with Odfjell Drilling back in 2018. In the second quarter and during some days of this third quarter, we completed a sale of 50% of our shares in Odfjell Drilling generating total proceeds of just over NOK100 million. Following this sale, we now own 1,500,000.0 shares in Odfjell Drilling. The divestment of parts of our Odfjell Drilling shares is in line with our cost of strategy of realizing assets to enable distribution of capital to shareholders over time.

We will continue to assess the holding strategy based on market developments and capital allocation priorities. Our total book equity value per the end of the period was NOK 20 per share and this is somewhat down from the first quarter mainly due to currency effects. Our cost tool continued to be in a very solid financial state, which has enabled us to pay dividends. We have positive net cash position and no draw on corporate LCF. With that, I am pleased to introduce HMH’s CFO and EVP, Thomas McGee, and that will take us through the HMH second quarter results.

Tom, the word is yours.

Tom Mackie, CFO and EVP, HMH: Thank you, Karl, Eric. Going to the next slide, order intake of $173,000,000 in the quarter, EBITDA $36,000,000 down year on year, up quarter on quarter, really impacted by the reduced pressure control spares volume due to current offshore rig market conditions. Talk a little bit about that for a second. Customer is being impacted by two things, one is a little bit of white space that we’ve heard them all talk about, all the drillers talk about, we’re a little bit of a tailing indicator on that. Again, we’ll talk a little bit about the future as we wrap up, these drillers are obviously very positive long term, but there’s a pocket of weakness here where, you know, that slows their their aftermarket and consumable purchase.

At the same time, the macro uncertainty, it’s been introduced into the market, weighs on owner rates a little bit in a way that they’ll try to say, I’ll push this out a little bit longer before I buy, nonessential spending gets cut. So I mean, overall pretty resilient quarter, but it is being impacted by that slowness. So the good news is that’s really that is the pocket weakness, while North America remains weak, it didn’t impact us much, and we made some good solid progress this quarter on some land efforts outside of North America. So overall, again, a little bit of weakness, but it’s very specific. In the past when you look back at COVID, which is a much, much larger event of weakness, if you want to call it that, and you looked at what happened to the order rates behaved in a similar manner, and post COVID they recovered fairly quickly in that environment.

We’ve seen kind of seen all this before, and we’ve just seen a little bit of air pocket here due to the white space with our customers. On the productivity and cost efficiency side, we say that we began yielding some results, really they just started. This is all the process of HMH two point zero and integrating the company and becoming one HMH. So the initiatives that we’re talking about here were the right long term initiatives for the company that we launched a year ago, has nothing to do with a little air pocket of weakness in the offshore market. And so those just started to really kick in in the second quarter, and that included some facility optimization, some very real heavy lifting by our team.

And finally, continue to take steps to mitigate the impact of tariffs, those change obviously, as we all know, rapidly and frequently. We think we have the situation under control, we have very good dialogue with our customers, we continue to negotiate the pricing impact of that with them in a very open and transparent way. We’re confident we can mitigate a lot of that, the second and third order effects that I talked about in Q1 are still there, is weighing on the general macro environment. But in terms of what we can control, we have a very good handle on that, our team has done a great job. So with that, I’ll pass it

David Bratton, SVP Finance, HMH: on to David. Great. Thanks, Tom. I’ll be with the total company results and then move into the segment details. Revenue for the quarter was $2.00 $3,000,000 down 2% year on year, primarily due to lower spares volume, partly offset by growth in projects and aftermarket services and up 3% quarter on quarter, driven by stronger aftermarket service performance despite the softness in spares.

Adjusted EBITDA in the quarter was $36,000,000 down 14% year on year, primarily due to lower spares volume, partly offset by stronger aftermarket services and cost reductions, up 10% quarter on quarter, driven by volume and indirect cost performance. The adjusted EBITDA rate was 17.7% in the quarter, down versus 2Q ’twenty four, driven by mix. Orders for the quarter were $173,000,000 down 4% year on year driven by projects, product and other and down 13% quarter on quarter driven by aftermarket services. Finally, on cash flow, unlevered free cash flow in the quarter was negative $10,000,000 due to the timing of annual employee incentive payments and back end weighted projects. We ended the quarter with $38,000,000 cash and cash equivalents on hand.

Next, I’ll walk you through the product line results in more detail. In aftermarket services, revenue was $92,000,000 in the quarter, up 6% year on year, driven by an increase in overhaul and repair activity and digital technology and up 11% quarter on quarter driven by higher overhaul and repair activity. Aftermarket service order intake was $79,000,000 in the quarter, down 3% year on year driven by overhaul and repair and field service, partially offset by digital technology orders and down 22% quarter on quarter, driven by the delayed offshore activity and repairs and field service. Spares revenue was $52,000,000 in the quarter, down 26% year on year and down 13% quarter on quarter, mainly due to lower pressure control spares volumes reflecting the current offshore rig market condition. Spares order intake was $64,000,000 in the quarter, down 3% year on year and up 5% quarter on quarter, driven by continued spare of our purchasing rate from the offshore customers while they work through the white space in the quarter.

In products, product and other, revenue in the quarter was 59,000,000 up 17% year on year and up 8% quarter on quarter driven by our progress on projects. Lastly, moving to net interest bearing debt, we ended the quarter with $38,000,000 in cash and cash equivalents and a net debt of $175,000,000 Overall, I’m proud of the team’s performance despite the macro environment this past quarter, and with that, we’ll turn the call back over to Tom.

Tom Mackie, CFO and EVP, HMH: Okay, just to wrap up, talk about the market a little bit and really talk about it from our customer perspective, so we can give you a good view of what’s happening. The North American land market, we do have some business there, and we want to continue to grow that, But overall, it doesn’t really impact the bottom line for us today much. Coming off some conferences this summer already, it’s pretty it’s not a great sentiment, I mean rig count is down, there’s a lot of talk about shale kind of rolling over and reaching its peak. So overall it’s created a pretty negative environment on the land market here. But on the complete other hand, despite the macro uncertainty that you see, which is very real, we talk people talk about, talk about cost escalating due to metals prices and everything else.

Over the last six to eight weeks talking to offshore customers, they become more optimistic in this environment. Now we saw this from the beginning of the year to today, despite the challenges that they were facing today, in the face of that, they’re improving their optimism on ’26 and ’27. And you’ve seen some of that in the contracts that have been announced, right, you see a lot of contracts that are starting, some of them will start this year, some of them not till halfway through next year, That obviously has an impact on us when you think about the timing of that, but the good news is they are firming up their view of ’26 and ’27, and it’s a very positive one. And when you look at the equity research that’s been coming out, I’ve noticed over the last week or two, there’s been some increased volume of, hey, this is looking good long term, let’s look to ’26 and ’27 coming out of the Wall Street research community. So despite a little bit of air pocket, despite a little bit of weakness, our customers see a very bright future offshore and are continuing to invest in their rigs for the long run and upgrade technology.

And again, once these contracts start, I think it’s going to be a quite positive environment. So with that, I will wrap it up and pass it back to the team and also.

Ivan Poskaya, CFO, Akastor: Thank you very much, Tom for that update. I will then take you through the Acastro financials starting on slide nine with our net capital employed. As mentioned HMH remains our largest investments with Acastro’s net capital employed corresponding to 50% of the book equity value in HMH. The carrying value of our HMH investment decreased by 35,000,000 compared to Q1, primarily then due to FX effects partly offset by positive net profit from HMH in the period. The net capital employed related to NES and DDV also declined somewhat in Q2 driven by FX.

The net capital employed of Akhov’s as of Q2 was 79,000,000 down from 109,000,000 in Q1, reflecting our 66.7% share of the net loss in the period. As noted, the current contract portfolio continues to generate losses in AKOS, which reduces our book value. That said, and as Karl mentioned, we view this book value as conservative and not fully representative of underlying asset values. The value of our listed holdings, which now include Odfjell Drilling, ABL Group and Maa Energy, decreased by a total of 57,000,000 in the period. 37,000,000 of this was related to a value decline in Awilco Drilling, broadly offsetting the cash dividend received from the company by Akastor during the period.

Our holding in Odfjell Drilling was valued at 146,000,000 at the end of Q2, down 16,000,000 from Q1. This was driven by the sale of shares for 57,000,000 in the quarter, of which 10,000,000 was received as cash in Q3, partly offset by an increase in the share price. After quarter end we divested an additional portion of the holding in Odfjell bringing total cash proceeds to SEK104 million. The negative value of other which includes smaller financial investments, pension accruals and various other provisions was reduced by NOK13 million in the quarter. The balance here mainly relates to pension obligations.

In total our net capital employed decreased by SEK147 million in Q2, primarily then driven by FX effects. I’ll then turn to the next page for an overview of our net debt movement or rather the net cash movement. In Q2, our total net cash position increased by SEK126 million to a net cash position of 145,000,000 at the end of the period. This increase then was primarily driven by the divestment of Odfjell Drilling shares as well as cash proceeds from AKOFS Offshore following their refinancing of Seafarer in April. The Q2 net cash position includes a net debt position of SEK228 million in DDV Offshore.

Total net interest bearing debt at the end of the quarter stood at a net cash position of NOK814 million including our interest bearing positions towards AKOFS Offshore and HMH. Compared to the previous quarter our position towards AKOFS decreased following the refinancing. And also half of the seller’s credit to Mitsui related to the transaction that we closed in Q1 was paid out in cash in the second quarter, reducing the remaining outstanding credit seller’s credit towards Mitsui to 39,000,000 per June, which are to be settled in Q4 this year. In Q3, the cash balance will be impacted by the receipt of then additional 57,000,000 from the Odfjell Drilling shares sale completed in July, as well as the approved dividend to be paid out in July also. Then our external financing facilities.

They remained as per end of the last quarter. The DDV term loan was reduced to about $26,000,000 following one instalment paid during the period. Our corporate bank RCF remained undrawn and fully available also per end of Q2. Per end of the quarter our total available liquidity was $7.00 4,000,000 including then 30,000,000 of cash through DDV. Then our consolidated P and L.

As a reminder most of our holdings including the HMH, NES and AKOFS are not consolidated and as such our consolidated revenue and EBITDA reflects only a very minor part of our total investments. DidiV Offshore reported revenues of 79,000,000 in the quarter with two out of three vessels on contract throughout the period. While Scandi Peruguino experienced low utilization as the startup of her new contract was delayed until June 21. EBITDA in DDV came in at $28,000,000 up year on year due to low utilization in Q2 last year and in line with the previous quarter. Looking ahead we expect improved earnings from DDB Offshore as all three vessels are now then on contract.

Other revenues were zero while other EBITDA came in at a negative of 18,000,000. As a result our consolidated revenue and EBITDA for the quarter ended at 79,000,000 and 9,000,000 respectively. Then a closer look at our net financials. Net financial items amounted to negative NOK11 million in the quarter. Financial investments contributed positively by NOK58 million primarily driven by value increase in Odfjellvirling.

The FX accounting effect was negative by SEK76 million, reflecting then the weaker dollar versus the NOK which impacts certain of our USD denominated holdings. Net interest and other financial income contributed positively by a total of 8,000,000, while share of net profit from equity accounted investments came in at a negative of 6,000,000, mainly reflecting our share of results from HMH and AKOFS Offshore. AKOFS contributed negatively by 43,000,000 while contributed positively by 41,000,000. And with that, I’ll pass the word back to Karl.

Karl Erik Kjersta, CEO, Akastor: Thank you for that, Irwin. And let me run off this presentation with some ownership agenda reflections of the portfolio. Let’s start on Slide 15. We have an overview of our portfolio of investments. As you see, we continue to have a portfolio of nine investment, of which four are liquid listed holdings.

And as mentioned already, we have reduced our ownership in Drilling with 50% and we now own 1,500,000.0 shares in Offa Drilling that is reflected on this slide. Let’s move on to Slide 16, where I think most has already been covered by Tom and Dave. As touched upon by Tom, we are somewhat cautious regarding the short term outlook for the drilling market. That said, we see encouraging signs when we’re looking future ahead. HMH is continuing to keep its S1 filing updated and it’s a preparation for a potential future listing, but the timing of public offer is subjected to a variety of factors like and therefore difficult to comment at this time.

Let’s move on to Slide 17, NES Farecroft. NES Farecroft continues to deliver growth in revenues year on year despite a more challenging environment for recruitment and especially permanent placements given some turmoils in the market. As mentioned previously, the company is exit ready and we are currently exploring several alternatives including a potential listing. Recently, we have observed some signs of improvement in the primary equity offering market and we remain cautiously optimistic that it may be possible to achieve an apractic valuation of a quality company like Nearest Aircraft. A key priority in addition to making this investment liquid is to continue to grow the company both organically and through M and A to enhance value for all shareholders.

Then on Slide 18, covering AKOFS Offshore. We are happy to see that AKOFS Offshore is delivering solid operations in yet another quarter. All three AKOFS vessels remain on contract through the second quarter and they all delivered solid operations for its clients. AKO Wayfarer delivered a revenue utilization of 94%, while AKOFS Santos delivered a revenue utilization of 93% in the quarter. Arco Seafarer delivered a technical uptime of above 95% with a revenue utilization of 92% due to weather conditions.

Revenue utilization was also impacted by a planned yard stay in May to prepare the vessel for coiled tubing operations. The vessel is scheduled to return to the yard in August for demobilization of the coiled tubing equipment and to carry out its five year SPS special periodic survey. The yard stay is expected to last approximately forty days and will impact the financials for the Seafarer vessel in the third quarter. With this, the total revenues for Arcos ended up at $37,000,000 and with an EBITDA of $10,000,000 in line with previous quarters. I would like to take the opportunity to highlight some positive Arcos milestones achieved so far in 2025.

Contract renewal of AQUA SIFRA with Equinor with a gross value of $300,000,000 Contract is set to commence late this year and will run until at the end of twenty twenty eight. A non recourse US110 million dollars refinancing of the mentioned seafarer completed in April and then also the contract award for Arcosantos with Petrobras with a gross value of almost $250,000,000 And this contract is planned to commence in the third quarter twenty twenty six and will last for four years. Also, Aker owners are well aligned. That is positive for the company, positive new ownership structure with Amul and Acosto as owners. Through these achievements, ARCOF is now in a stronger position, both strategically and financially compared to years ago.

We are encouraged by the outlook and as touched upon earlier, we continue our efforts to demonstrate underlying values of Arcos going forward. Then let’s move to Slide 19 and DDV Offshore. We are as mentioned pleased to see Peregrine commence its contract in second quarter. With this, all the vessels are on contract in Australia. And looking ahead, DDB Offshore remain focused on maximizing fleet utilization, support by secured contracts backlog that will provide a solid foundation for operational and financial visibility.

Our target remains unchanged and we will continue actively assess secondhand market opportunities for potential vessel sales. And finally, let’s move to Slide 20 that sums up the key priorities for Acosto going forward. Acosto strategy continues as before, with our key target being to develop the companies in our portfolio and when the time is right and values are attractive, execute value enhancing exits. We are currently in a strong net cash position with no drawn corporate facilities, enabling us to time transaction when values are attractive. We are pleased to announce a dividend of NOK0.35 per share today and this is an important step towards delivering on our ultimate goal of returning proceeds to our shareholders.

With that, Ewen, we are through the presentation and we will move over to Q and A session.

Ivan Poskaya, CFO, Akastor: And I guess we take a short break before we continue. Thank you, Karl. Yes, we’ll just pause for a couple of seconds in order to coordinate the Q and A session. Thank you. Thank you.

We’ll start with a question for HMH and I’ll direct this to you then Tom. Can you elaborate on the key growth drivers for HMH going forward and any specific markets or technologies that you are focusing on?

Tom Mackie, CFO and EVP, HMH: Yes, I think that we can talk about that in our presentation that you can reference that we filed in the past. And I think you have got offshore way to think about it would be within the core would be offshore equipment, offshore aftermarket, land equipment, land aftermarket, mining equipment, mining aftermarket. These are areas that we’re pursuing. There’s technology development offshore, like the electric BOP, that our team has done a good job of of bringing forward and the drill form technology where we buy and bring to other markets, that’s an example of a land technology, continue to try to expand our riser services aftermarket, continue to expand our parts and service businesses on land, and we’ve got a significant cost out initiative on mining right now to be able to make our core products more competitive in broader markets. So I think about scaling that core is really how we think about growth.

And then you have the parts you can’t control, which is what we talked about this morning, is rigs are reactivated and as you see more rigs operating globally that’s obviously good for us.

Ivan Poskaya, CFO, Akastor: Thanks, Tom. Then a that we have received in some different shapes and versions, but I’ll direct this one to you, colleague. Given the recently approved cash dividend and a cost of strategy to realize assets, what is the company’s long term strategy for shareholder distributions? And are there any specific targets or timelines for potential future capital returns?

Karl Erik Kjersta, CEO, Akastor: Yes. First of all, as we have touched upon, our customers now in a strong financial position with no debt at the corporate level and a solid net cash position. And recently approved dividend of NOK0.35 represent a milestone for our cost of marketing of our first ever cash distribution. I And think also reflect our strong commitment to return value to our shareholders through assets realizations. But looking ahead, we remain committed to this strategy.

While we do not operate with a fixed payout ratio or distribution time, our intention is to return a significant portion of net proceeds from future realizations to our shareholders. But the level and timing of further distribution will of course depend on factors like future divestments activity, capital requirements and also of course overall market conditions.

Ivan Poskaya, CFO, Akastor: Thanks Kalle. Then a last question I believe regarding Aakovsjen you touched upon this color. But let me read the question for you. Akastor increased its ownership in AKOFS in the first quarter, and AKOFS Santos was recently nominated for a new contract. Could you provide some more insight into the strategic direction and how you are thinking of Alkastor’s ownership strategy on knock offs?

Karl Erik Kjersta, CEO, Akastor: Yes. As we have touched upon, we have significant strength in the backlog and earnings visibility from 2026 and onwards. That is always positive when it comes to developed values. And looking ahead, we will continue to assess the potential to realize values from this our investment in our costs. There’s no fixed plan at this stage, but a range of option that could be actual whether that is through sale, partnership or the structures.

The key focus for us is to ensure that we maximize in terms of long term value and we will remain flexible around how and when this might happen.

Ivan Poskaya, CFO, Akastor: Thanks, Karl. Then a last question, which I guess goes back to the previous question, but I’ll ask it anyway. Are there any plans to initiate a share buyback program given the significant discount to underlying value? So, Karl?

Karl Erik Kjersta, CEO, Akastor: I think when we are saying that we are committed to return proceeds to a shareholder, it can be done either through dividends or through buyback programs. And this is up to the Board to assess as we go along. So a buyback program is also something that can be on the menu going forward.

Ivan Poskaya, CFO, Akastor: Thank you very much, Karl. And with that I do believe we are through all the questions. And we would just like to thank you all for your attention and thank Tom and David in Houston for participating. And welcome you all back for our presentation of the third quarter results then on October 30. Thank you very much.

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