Earnings call transcript: Odfjell Technology Q2 2025 revenue hits SEK 1.4B

Odfjell Technology Ltd (OTL) reported its Q2 2025 earnings with revenue reaching approximately SEK 1.4 billion. The company, which InvestingPro analysis shows maintains a GREAT financial health score of 3.36, continues to expand its service offerings despite a pre-market stock price decline of 3.33%. The stock’s movement reflects investor reactions to the company’s strategic initiatives and market conditions, with the company demonstrating strong financial metrics including a healthy current ratio of 1.68.

Key Takeaways

• Revenue for Q2 2025 was approximately SEK 1.4 billion.
• EBITDA adjusted to SEK 204 million, excluding restructuring costs.
• Stock price decreased by 3.33% in pre-market trading.
• Strategic partnerships and expansion in plug abandonment services announced.

Company Performance

Odfjell Technology’s performance in Q2 2025 demonstrates resilience and strategic growth. The company reported SEK 1.4 billion in revenue, showing its ability to maintain substantial earnings despite challenging market conditions. The firm’s expansion into plug abandonment services and strategic partnerships, particularly in the Gulf of Mexico, underscore its commitment to broadening its market reach.

Financial Highlights

• Revenue: SEK 1.4 billion
• EBITDA: SEK 193 million (adjusted to SEK 204 million excluding restructuring costs)
• Dividend paid: NOK 60 million, representing an 11% yield
• Total dividends since listing in 2022: NOK 444 million

Market Reaction

Odfjell Technology’s stock currently trades at $5.39, with InvestingPro analysis indicating the stock is undervalued based on its Fair Value calculations. The stock’s movement reflects investor sentiment towards the company’s strategic investments and restructuring efforts. Trading near its 52-week range of $3.57-$5.84, the stock has demonstrated remarkable resilience with a 39.11% year-to-date return, suggesting strong market confidence despite current fluctuations.

Outlook & Guidance

The company anticipates increased earnings in the second half of 2025, with the full potential of its performance improvement program expected to be realized in 2026. According to InvestingPro data, analysts predict continued profitability this year, with an EPS forecast of $0.81 for FY2025. Odfjell Technology plans to reduce capital expenditures from Q4 2025 onwards and is exploring mergers and acquisitions to strengthen its position in the plug abandonment market. Get exclusive access to OTL’s detailed Pro Research Report, part of InvestingPro’s coverage of 1,400+ top stocks, for comprehensive analysis and actionable insights.

Executive Commentary

CEO Simon Lee Jung stated, "We see the full potential being taken out in 2026," highlighting the long-term benefits of current strategic initiatives. He also mentioned, "We are not in a hurry to enter P&A market because we see now that we like to find our way of doing it," indicating a cautious yet strategic approach to market expansion.

Risks and Challenges

• Market softening could impact revenue growth.
• Restructuring costs might affect short-term profitability.
• Dependence on strategic partnerships for market expansion.
• Global economic conditions and potential tariffs could pose challenges.

Q&A

During the earnings call, analysts questioned the expected reduction in capital expenditures and its impact on future growth. Executives reassured that the reduction aligns with strategic goals to optimize operational efficiency without hindering expansion plans. The positive outlook for 2026 was emphasized, despite current market challenges.

Full transcript - Odfjell Technology Ltd (OTL) Q2 2025:

Gertaoglund, SVP Finance and Investor Relations, Odfjell Technologies: Welcome to Odfjell Technologies Q2 presentation. My name is Gertaoglund. I’m the SVP for Finance and Investor Relations. I’m joined today by our CEO, Simon Lee Jung, and our CFO, Eunice Ostensen. The full presentation is available on our website, and I ask you to take note of the disclaimer on page two.

Simon will start with the key highlights, including market outlook, backlog, and contract status. Jone will then take you through the financial results before we conclude with a Q and A session. You can submit your questions through the webcast portal or by using the dial in numbers. I now give the word to Siemens. Thank you, Gurt.

Thank you

Simon Lee Jung, CEO, Odfjell Technologies: so much. And welcome to the Q2 conference call, all of you. Just to start with a quick focus on the company itself, we have still a global presence. We operate in more than 30 countries and we are actually looking at also new areas. We have a strong liquidity position.

We have a substantial equipment pool with NOK4.6 billion as a value. And we have maintained a very strong order backlog over the period.

: From

Simon Lee Jung, CEO, Odfjell Technologies: highlights, this one, yeah. Sorry, sorry. Just flipped the wrong here. Sorry. Financial highlights are, as I said, the revenue is approximately SEK1.4 billion.

We have achieved NOK193 million EBITDA. If we adjust for the restructuring costs, we will come back to later and some one offs, the underlying operations are about SEK204 million, which indicates a trend for increased earnings and margins as we have also indicated earlier in the 2025. The order backlog, as I said, maintained at a high level. And the good news is that we also see more activity within the rail services sector, which has also grown their backlog over the period. We still pay $60,000,000 dividend.

We have done that for a while now, which yields approximately 11% over the period. Market outlook. Thank you. In general, we need to share somewhat information what we see on the market side. We operate in a market where over the period last period has been some softening, but we still see quite heavy activity within the sectors we are operating in.

The tender pipeline about, as we talk about, about NOK8 billion is just an extract of what we actually have put on our priority list, which is a mix between the different business areas. There are quite a lot within rail services. There are actually more and more activity within plug abandonment activities, especially in The UK and in The Middle East and somewhat also now in Norway. But UK and Southeast Asia is more active regarding plug abandonment. We also see now that there are activities within operations, typical potentially wins in that direction.

And of course, we also see that the activity level within project and engineering are quite active. We have now finalized all the SPSs for ODL, but we see still quite much activity for engineering projects coming over the next period. What we see now is that, yes, we have spent CapEx for growth. The company has delivered well over the period. But we also see now that we will start to put priority on investments that could bring the company to a next level.

And that’s also one of the reasons we have increased CapEx over the period because they are invested against both maintaining the position we have, but also future spends. We will for the type of growth thinking, we are looking at the potential M and A market. We will still we have already invested in our book heavily within wired pipe, power pipe, where we can come back to more details. But we today have three contracts within that area, two with power pipe and one with extension with regular wired pipe. And the reasons we are has increased CapEx is also that we due to the fact that there are delivery time on equipment that we see are relevant for many of those tenders we are working with, that we need to make sure that we have CapEx in time and place that we can meet and win the requirements from the different tenders we are working with.

That means, as I said, somewhat front end loading of that. But still, we invest against type of leads that doesn’t bring us up to the level we want regarding both margins and cash flow. For the next for the order backlog slide, nothing really more to say. I think the good thing there is a strong backlog within rail services. Operations are always very stable.

We also reported the options, but within platform operations, the options are in very much up to us and ours to lose. So we report that. But in Well Services, we are quite conservative when we estimate the Well Services backlog. We know that many of those contracts are based on frame agreements and not that fixed as a type of term contract. So we are so this is just an extract of the potential we need.

Approximately, I think less than 50% we are reporting as a backlog. So there are much more potential in here, but we don’t take that into grant just to be careful on that side. We have recently also within rail services signed new contracts in The Middle East and Central Asia. We finally signed a very important contract for us in Turkmenistan with Dragon Oil. And we also have signed a new fishing and retrieval contract in Kuwait.

In addition to that, we have also announced that we have won a strategic contract with what I call a blue chip client for drilling rental tools, which will start from Q4 and onwards. Quite important, these contracts are all on the right side of the margin level we are looking for. And this is also why we are investing in that direction. We paid dividend. We have paid stable dividend over the period.

Since listing, we have paid NOK444 million to shareholders since we listed in 2022. That means quite unique position. And we still prioritize both growth and dividend. While saying that, we will carefully look forward now because there are some very interesting leads we are looking for, in the South America and within some P and A type of activities. We are looking for maybe we will do some focused investments in that direction based on, of course, winning contract and based on the right level of margins and on tools and services.

P and A will be important for us. But I have stressed many times that even though the markets are very, I would say, attractive, interesting, growing, we see all over the place that plug abandonment will be more and more. But I think clients are looking for solutions that are more, I would say, maybe smart, disruptive to the regular way of doing it and which will require also more new technology and different way of executing those kinds of processes. So we see a P and A market, which fits very well into OTL as a company that integrates both well services operations and engineering. And with the right mix of tools and partnership, we are quite focused to go in that direction.

I actually forgot to mention our partnership in The Gulf Of Mexico with OSP. We expect now that the first contracts with rentals and support and both in The Gulf in South America and also synergies against the Middle East market will pay off and start later this year. OSB is a very strategic partnership for us and has very complementary equipment and technologies that will fit into our portfolio of services. So yes, we focus growth over the next period. You will see we will see that we have indicated a higher income, higher earnings, higher revenue second half.

We see the same going on in 2026. And that’s why we also have done the Performance and Improvement Program, which is part of the growth history we have. We started early back in 2024, initiated that program and significant, I would say, total program within the company, streamlining operation resource base, taking down manning, doing things more efficiently regarding process analysis. Today, have let go, reduced the headcount in more than 80 people. We have today SEK50 million in restructuring costs.

We still see some restructuring costs coming out the next half. But all these activities within improvements will gain and start to bring to the results in the company later this year will be a part of the second half increase in both in earnings and efficiency. And we see the full, I would say, potential being taken out in 2026. So we have not absolutely not forgotten any or reduced the focus on the improvement program. I also can mention that our organization down in Manila will also be streamlined more in direction with what we actually are doing there also to reduce cost, manning and increase efficiency.

So with that, we look at the market as a quite potential positive for us. We indicate increased earnings second half. We see that the CapEx level well could be viewed somewhat high currently, but that will be stabilized and will be done against contracts and investments, which yields the right level of return. So with that, thank you, Jone and start on the financial update. Thank you, Simon.

Jone, CFO, Odfjell Technologies: This is Jone. Steady activity level with underlying margin improvement. The quarter is in line with Q1, reflecting steady performance without highs and lows. EBITDA of SEK 193,000,000 includes SEK 11,000,000 in restructuring costs related to our performance improvement program, which means that adjusted EBITDA is SEK $2.00 4,000,000 in Q2. The improvement program is on track and we have had 50,000,000 in restructuring costs year to date and that’s the majority cost is behind us.

The underlying improvement in the last two quarters expected to continue into 2025. We have, as Simon said, already reduced our workforce with 80 employees in 2025. Available liquidity remains solid despite high front loaded strategic CapEx and working capital build up. We expect improvement in cash position, improved working capital and reduction in CapEx in Q4. The order backlog remains stable around billion.

Next, please. The next is well services. EBITDA margin improved compared to Q1 due to improved product mix. EBITDA margin is 3134% if we exclude pass through charges. Secured extension of Kuwai from Turkmenistan contracts and the high performing wide wheel pipe contract for long.

There’s a high tender activity is ongoing globally with focus on high margin business opportunities. We expect that the high front loaded CapEx combined with effects on ongoing improvement program will contribute positive on EBITDA and cash flow from Q3. Operations, the activity level is steady. Rig mix stability supports predictable earnings and margin lift underway from performance improvement program. Operation remained focused on optimizing operation structure, continuous improvement of efficiency in operation and optimize the cost level.

There’s a high tender activity ongoing globally, both for traditional drilling operation and for P and A projects. One of our main commercial priorities for operation is to secure work with Brunei Shell Petroleum in Brunei using the technology and experience from our previous collaborations. Engineering delivered a strong quarter with high revenue and strong EBITDA margin. Increased activity in Q2 due to high activity on SBS for Deep Sea Stavanger and Deep Sea Aberdeen, which was successfully completed on time, on budget. SBS work for key client hot fill drilling has been an important element of our development over the last years.

In parallel, we have developed solid position and contract within modification and at fixed installation platforms and floating storage with key clients as Equinor and Akerbetter to balance our portfolio. This is showing the PER and revenue development since Q1 ’twenty two for revenue, stable, predictable and controlled growth in revenue. Solid EBITDA growth until Q2 ’twenty four, small growth in Q3, Q4 and Q4 ’twenty four and improvement from Q1 ’twenty five. We expect this improvement to continue into the next upcoming quarters. To summarize, stable operation with margin improvement, dividend of 60,000,000 equal to direct yield of 11%, strategic 25 CapEx front loaded from wide rail path and growth projects, strong cost discipline approach and on track with our performance improvement program.

And finally, positioning for a stronger second half, driven by contract ramps up at the well service product mix and ongoing efficiency initiatives.

Gertaoglund, SVP Finance and Investor Relations, Odfjell Technologies: Thank you, Steven and Yuna. We’ll now move on to the Q and A session.

Operator: Thank and wait for your name to be announced. To wait through your question, please press 11 again.

Gertaoglund, SVP Finance and Investor Relations, Odfjell Technologies: Once again, that’s 11 to ask a question.

Simon Lee Jung, CEO, Odfjell Technologies: English.

Gertaoglund, SVP Finance and Investor Relations, Odfjell Technologies: I think we there’s no yeah, there’s one question from Thulz Ossen.

Operator: Thulz Ossen, the first question. Your line is open.

: Thank you, guys. Hi, there, Simen and team. Just a quick question on CapEx. As you think about I know you don’t give guidance, but as you think about 2026 forward, what should we sort of think about on that side, given sort of the quality elevated level that we’ve seen coming?

Simon Lee Jung, CEO, Odfjell Technologies: As I said, Thurs, we don’t guide on numbers. But I think we will absolutely we have front loaded some CapEx and we see that probably that’s what you think. Will that trend just continue? No, that will not continue. We reduce CapEx because some of this has been loaded early, some linked to real well, some linked to strategic equipment we need to secure for future contracts.

Typically, we will maintain the equipment with some part of the CapEx that’s I can just indicate some 100,000,000, SEK million, 30,000,000 for maintenance. But on top of that, we see a reduction in CapEx from at least from Q4 and onwards. But I also say that if we find cases where we see a good rate of return and rate of return on investment on all the right CapEx, all the right KPIs, we have capacity to do investments. But we don’t plan for more front up. We don’t plan for more that.

So we see a reduction for the current level from Q4 and onwards.

: Thank you, Daskeer. Another one as well. In terms of you talked a bit about M and A. Are you then talking about more, call it, partnership, buying partner companies? Is this equipment or full companies?

How do you think about that position, if you will?

Simon Lee Jung, CEO, Odfjell Technologies: Regarding M and A, I think we did partners or we bought partly us into the ownership of RealWell. We see RealWell products as quite interesting going forward. Currently, have two contracts on power pipe. One will start later this year, I guess October, November, maybe in that area. And the second package will start up in March next year with very nice, I would say, numbers, good margins, I would say excellent in that respect, plus that we have one still one wire pipe from the previous technology we bought from NOV with Deep Seaverdin with Equinor that will run the wired pipe out ’26.

But as you also know, that wired pipe with AquaVP is done future the NOV, but we still see the package we have on one of the rigs for ODL will run out 25. So regarding that’s an M and A in a very early stage project. What we’re looking at when we I mentioned that we are positioning ourselves for future plug abandonment work on kind of a major operations. In that respect, we have targeted a couple of companies with technologies, which operate today with full cash flows and we don’t buy into any equity raise or any developing raise. We buy we could potentially buy us into type of technologies that would be quite interesting for providing a more complete package to clients for plug abandonment activities.

We do that together with operations in OTL. We also look at subsea plug abandonment together with ODL, meaning that subsea plug abandonment will be kind of a natural operation for us. It used to be one company. We know we operate on all the ODL rigs already. We know how to integrate smart operations and very efficient integrated operations.

So that will be just extracted more into the plug world. But still, the plug abandonment are still on the early stage. But we foresee that OTL as a whole will benefit from that market. But we also like to look at the tools and equipment that can make a more disruptive solutions compared to the regular way of doing it. So I think that illuminates one of them.

OSP is a strategic partnership in The Gulf. There we decided to go with a partnership, not straight M and A. What happens in the future? Nobody knows. But we are carefully looking at the Gulf Of America and Brazil typical.

We see quite many interesting, very interesting leads over there. Time will show how we generate it. But we expect the first revenue from that region, Americas, later this year. That’s what we expect.

: Okay. So that means fourth quarter then basically. Anyway, good to hear that things yeah. Are moving in And and good to hear that things are moving in in in The US Gulf and in in in the South America and such. And okay.

Thank you, guys.

Simon Lee Jung, CEO, Odfjell Technologies: Just to say that, Thurgood, another just a comment. What we do over there will be tools, equipment, technologies. We will not provide in a way personal services in the Gulf Of Mexico. That will be based on rentals of drilling tools and equipment for downhole operations and others regarding drilling, well intervention and similar. So that’s where we kind of attached the OSD into the portfolio, which is very, very, I would say, complementary to our own package or storage of tools and technologies.

Just as I that. Come on.

: Just as small follow-up on that, in terms of tariffs, will that have an impact on your, call it, U. Ink expansion as such?

Simon Lee Jung, CEO, Odfjell Technologies: What? I didn’t hear. Sorry, the tariffs. No, no, no, no. Sorry, I didn’t hear you, Johannes.

No, we don’t see the tariff being hit for us. If there are requirements for new tools technologies, their smartness with OSP that will be produced in US. So they still have a manufacturing center over there. But equipment we have today, that will not be tariffed as we see it. Potentially new tools equipment could be manufactured in manufacturing centers already established in The U.

S.

: Okay. That’s good. Thank you.

Operator: Thank you. There are no further questions on the audio. I would like to hand over for webcast questions.

Jone, CFO, Odfjell Technologies: Yes, we have a few written questions that we’ll take. And one question here from Ola Mainrein is there is a reduction in headcount. Is it a signal of lower activity level and possibly revenue going forward? Yona? Yeah.

No. The answer is no. The reduction is a combination of indirect position, which means overhead positions and direct. We do not see any reduction. Quite opposite, we see an increase.

And the reason for this is that we will have a more efficient workforce, and we will increase utilization for employees.

Simon Lee Jung, CEO, Odfjell Technologies: Yeah. And

Gertaoglund, SVP Finance and Investor Relations, Odfjell Technologies: There is a question from Lucas, Dal, on the projected earnings impact on bio drill pipe in ’twenty six versus ’twenty five. And I think we could say that they would be fairly similar but with some improvements in ’26 and of course with some potential if our fourth string could be put into use. Yeah. But it will be a little up from ’25.

Simon Lee Jung, CEO, Odfjell Technologies: I guess you’re right about that.

Gertaoglund, SVP Finance and Investor Relations, Odfjell Technologies: Yeah. And he’s also asking if there’s any early thoughts on ’26 in light of your market comments pointing towards softening markets. I think it’s maybe been covered, but you’re

Simon Lee Jung, CEO, Odfjell Technologies: I can’t just say, well, you know, see, if we look at our competitor and we look at the market around us, it has been so much slower over the last period, which we also have indicated earlier that the so not too many around us are forecasting high growth over the next half year. Quite the opposite, flat around there. But we see now that the activity level within the oil companies based on the fact that they expect reduction in the global production, both in most of all markets. We are very much into production part of that market and the production will maintain and the demand for oil are still quite high. So based on we just count up the leads we see ahead of us.

We just talk to our clients and see what they are doing. The only thing that again are uncertain, we have to trust the clients and their schedules And we do that. But sometimes they postpone activity. The only uncertain I can say that we do not control is the client’s time schedule for spending money. If it’s today, as we see today, we are still positive to increase activity and earnings over the second half and into ’26.

That’s how we see it.

Gertaoglund, SVP Finance and Investor Relations, Odfjell Technologies: There is one question on, is it important to become a one stop shop within P and A? Or can you compete with the right technology and quality of service?

Simon Lee Jung, CEO, Odfjell Technologies: I think they are not necessarily important to be a one stop shop. What we see and I guess that we have spent now two years to analyze that market significantly, we are not in a hurry to enter P and A market because we see now that we like to find our way of doing it and achieve decent results. P and A will always be, I would say, a cost for clients, no income. But P and A combined with slot recovery might be of interest. But what we see now is that every P and A campaign are different from each other.

There’s not one size fits all at all. There are different fields. There are different challenges. There are different reservoirs. Are different age.

There are different this and that. So everything is kind of different. Like you build a new field development, P and A is equally different from the other P and A activities. You can’t just say that one size fits all. So there will always be some tailor made.

And what we find as what we can call a party one stop shop is that we will have a basic tools, equipment and ownership in and maybe also partnership with some clients and then add on what’s necessary to make disruptive difference to win that P and L campaign. So we are not there to make a one stop hotel shop. We are there to make a stop hotel shop in a way, but together with others. And the smart investments we have talked about, there could be some M and A we are doing, but there also be a partnership with key players, maybe different from case to case, but with some stability the bottom. Maybe a little vague answer, but they are not a clean answer here.

Gertaoglund, SVP Finance and Investor Relations, Odfjell Technologies: Yep. There is one question on working capital buildup in Q2. We did see a buildup through Q1 and Q2. It is a seasonal effect. It’s something we see every single year.

And then we see an unwind in Q3 and mainly Q4. And we’re expecting the same this year. And I think with both the CapEx drop in Q4 and the working capital improvements, we should see a positive cash effect before year end. I think most of the questions here have been covered. And we are think we’ll conclude the Q and A session today.

And I’d like to thank everyone for joining the call. And please reach out to me if you have any follow-up questions. Thank you.

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