REG - Hunting PLC - Q3 2023 Trading Update

HuntingAnnouncement

26/10/2023 07:00

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RNS Number : 3031R  Hunting PLC  26 October 2023

 For Immediate Release  26 October 2023

 

 

Hunting PLC

 

("Hunting" or "the Company" or "the Group")

 

Major Subsea Order

and

Q3 2023 Trading Update

 

Hunting PLC (LSE: HTG), the global precision engineering group, today
announces a further major subsea order and also issues a Q3 2023 trading
update.

 

Highlights

 

·       $59 million order for titanium stress joints received in
October 2023.

·      Group EBITDA of $75 million, with the result in Q3 2023 similar
to Q2; and 2023 full year guidance remaining unchanged at $96-100 million.

·     Total cash and bank / (borrowings)(1) of $(68) million at quarter
end. Year-end position now anticipated to be broadly zero.

·       $511 million sales order book as at 30 September 2023.

·       Launch of the Hunting 2030 Strategy.

·       Opening of the Company's joint venture threading facility in
Nashik, India.

·       Robust demand across most product lines.

·       Outlook continues to be positive, driven by international
activity.

 

Jim Johnson, Chief Executive of Hunting, commented:

 

"We are delighted to have received another major order for Hunting's titanium
stress joints. The technology is gaining further acceptance for application to
offshore production vessels and we are pleased to be supporting clients with
technology which delivers safer and faster cash flows for them.

 

"The performance of the Group has been encouraging in the period driven by
strong international demand for oil and gas, underpinned by an increasing
global focus on energy security and continued economic growth. Each of
Hunting's product groups continues to execute on its strategy of growth, as we
outlined at our Capital Markets Day.

 

"Our diverse product platform plays to the long-term investment themes of the
industry, including strong growth in offshore work and international activity
levels growing at a robust rate.

 

"We are also pleased to note that commodity prices are showing resilience.
This strength will continue to deliver commitments to new drilling and
completion activity as we enter 2024 and positions the Group strongly going
forward."

 

Major Subsea Order

 

The Company is pleased to announce that in October 2023 it received a further
large order for its titanium stress joints for a client operating in South
America. In line with the Hunting 2030 Strategy, the Group has continued to
pursue growth opportunities in the offshore segment of the global energy
market, with today's announcement confirming the continued success of
Hunting's stress joint technology for application to Floating, Production,
Storage and Offloading facilities. The $59 million order will be completed
over the next 28 months with revenue being recognised over this timescale.
With this new order, the Group's total sales order book has increased from the
position reported at quarter end.

 

Q3 Trading Update

 

Hunting's trading performance during Q3 2023 has continued its positive
momentum, as international drilling activity continues to drive demand for its
major product lines. Activity in South America, the Middle East and Asia
Pacific markets continues to be high, offsetting some softness seen within the
North American onshore market. Year-to-date EBITDA of $75 million reflects a
near doubling compared to the same period in 2022, as the focus on energy
security and global economic growth increases. Hunting's EBITDA result in Q3
2023 is similar to Q2 and well ahead of Q1 2023 respectively, demonstrating
the broad-based strength of the Group's diverse product portfolio. Group
EBITDA margin has also exceeded 11% in the quarter, with pricing and demand
remaining firm.

 

The Group's balance sheet remains strong, with net assets as at 30 September
2023 of $865 million. Working capital increased by $28 million over the
quarter as investment to meet secured orders continued, resulting in total
cash and bank / (borrowings)(1) of $(68) million as at 30 September 2023.

 

Management believes that cash generation will accelerate in the balance of the
year and going into 2024, with a cash and bank / (borrowings)(1) position at
year-end now anticipated to be broadly zero, due largely to new orders
received in the period, coupled with order completions and payment timings.

 

The 2023 interim dividend of 5.0 cents per share will be paid on Friday 27
October 2023, which will absorb $8 million. Capital expenditure for the full
year is also now anticipated to be c.$35 million.

 

In summary, the Board remains comfortable with current EBITDA expectations of
$96-100 million as sales momentum and profitability are sustained.

 

Product Line Overview

 

The Group's global OCTG, Premium Connections and Accessories businesses have
reported a strong performance in the year-to-date. Well completion activity in
South America has delivered robust growth in the year, as activity in Guyana
and Brazil remain strong. In Asia Pacific, tender activity in China, India and
the Middle East is also reporting good momentum.

 

Hunting's Perforating Systems business has reported headwinds during the past
two trading quarters due to the reducing North American onshore rig count;
however, EBITDA results remain broadly similar to 2022 as margins remain solid
due to the prevailing product mix in the year-to-date.

 

Within the Advanced Manufacturing product group, the Dearborn business has
reported strengthening results in the year, with pricing and margins
increasing. Non-oil and gas sales continue to increase.

 

The Subsea Technologies product lines have reported strong results during the
quarter, with demand for hydraulic valves and couplings delivering record
results within the Stafford business, supported by ongoing activity in the
Spring business as orders for titanium stress joints continue. New orders for
Flow Access Modules within the Enpro Subsea business have also accelerated in
the quarter.

 

Other Manufacturing, which includes well intervention, well testing and
trenchless products also report good results.

 

Segmental Overview

 

The Hunting Titan operating segment has reported flat results in the
year-to-date, compared to the prior period. This result demonstrates the
strength of the segment's product offering and its steady pricing and margins,
despite the reduced US onshore rig count. International sales continue to
improve, in line with its strategy to grow its presence in South America, the
Middle East and Asia Pacific.

 

The North America operating segment has delivered very strong results, driven
mostly by the OCTG and Advanced Manufacturing businesses. As noted above,
activity in South America has been extremely strong in the year given the
drilling success in Guyana and the long-term development commitments made by
major operators in the period.

 

As noted above, the Group's Subsea Technologies businesses have also reported
strong increases in activity in the period.

 

The EMEA operating segment continues to complete work for Tubacex for Brazil,
supported by growing momentum in the Middle East.

 

Hunting's Asia Pacific operating segment also reports strong tender activity
in the period, and will benefit from the new threading facility in Nashik,
India, which opened in September.

 

 

Hunting 2030 Strategy / Capital Markets Day

 

At the Capital Markets Day in September 2023, Hunting's management set out its
strategy for growth to 2030. The Group plans to deliver c.$2 billion of sales
per annum by the end of decade, at EBITDA margins in excess of 15%.

 

Key areas of opportunity include growth of its OCTG businesses, driven by
strong international oil and gas demand and the high-growth energy transition
markets of geothermal and carbon capture, with an increase seen this quarter
for geothermal tenders for delivery in 2024.

 

Hunting also sees strong growth in its Subsea businesses as offshore
investment by the global industry is projected to double throughout the
remainder of the decade.

 

The Group also plans to accelerate its non-oil and gas sales, predominantly
through its Advanced Manufacturing businesses, as it targets the high-end
markets of aviation, commercial space, defence and medical.

 

The above strategy is underpinned by a focus on delivering strong free cash
flow to the end of the decade and an increasing dividend distribution.

 

Date of Next Trading Update

 

The Group's next Trading Update is scheduled for Wednesday 10 January 2024.

 

 

For further information please contact:

 

 Hunting PLC                        Tel: +44 (0) 20 7321 0123

 Jim Johnson, Chief Executive

 Bruce Ferguson, Finance Director

 lon.ir@hunting-intl.com

 Buchanan                           Tel: +44 (0) 20 7466 5000

 Ben Romney

 Barry Archer

 George Pope

 

Notes to Editors:

 

About Hunting PLC

 

Hunting is a global engineering group that provides precision-engineered
equipment and premium services, which add value for our customers. Established
in 1874, it is a premium listed public company traded on the London Stock
Exchange. The Company maintains a corporate office in Houston and is
headquartered in London. As well as the United Kingdom, the Company has
operations in China, Indonesia, Mexico, Netherlands, Norway, Saudi Arabia,
Singapore, United Arab Emirates and the United States of America.

 

The Group reports in US dollars across five operating segments: Hunting Titan;
North America; Subsea Technologies; Europe, Middle East and Africa ("EMEA")
and Asia Pacific.

 

Hunting PLC's Legal Entity Identifier is 2138008S5FL78ITZRN66.

 

 

Note 1 -Total cash and bank / (borrowings) comprises cash and cash equivalents
less bank debt and excludes the long-term shareholder loan of $3.9 million and
IFRS 16 lease liabilities.

 

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