The TTS Group ASA's Q3 operating profit before depreciation was MNOK 2, a significant improvement compared to a loss of MNOK 80 in the corresponding period last year. - We are still in the middle of a demanding turnaround that will only take full effect on group earnings from 2015 and 2016, but the development so far this year shows that the course is set right. As cost-cutting measures proceed at full strength, we also put into place a more customer- and market-oriented corporate structure, says Björn Andersson, CEO of TTS Group ASA.

TTS Group ASA reports an operating profit before depreciation (EBITDA) of MNOK 2 for Q3, compared to operating losses of MNOK 80 and MNOK 10 in Q3 2013 and Q2 2014 respectively.

- We have systematically implemented measures - both at a group level and within our different subsidiaries - in order to cut costs and improve efficiency and competitiveness. Achieving full impact of improvement measures in ongoing projects with substantial lead-time is challenging, but we are progressing well on the targets set. Even though it is so far by the narrowest of margins, I am pleased to see that we report positive figures after four quarters of losses, says Andersson.

The Group's Q3 revenue was MNOK 549, on par with the same period in 2013 but slightly down compared to a turnover of MNOK 617 in Q2 this year. The Q3 order intake was MNOK 611, compared to MNOK 890 in the corresponding period last year. The decrease was due primarily to weaker offshore markets.

The TTS Group reports a year-to-date EBIDTA loss of MNOK 36, compared to a loss of MNOK 20 the first three quarters of 2013. Total revenue so far this year is MNOK 1 720, down MNOK 334 from the first nine months of 2013. A lower level of activity within offshore and the market for heavy-lift cranes is the main reason for the decrease.

The order backlog is a solid MNOK 3 502, significantly up from MNOK 2 853 in Q3 2013.

Introducing a more customer- and market oriented business structure

- Our overall business strategy focuses on providing complete cargo handling solutions in a lifetime perspective for key end users within the shipping and offshore industries. We aim to build strong and coherent structures around our customers' needs and are therefore implementing a new operational model for the Group. Leaving our former, more product-oriented model, we now establish customer- and market-oriented business units based on essential ship-types. This also means a build-up of broader product portfolios and offerings within each business unit, says Andersson.

TTS' business operations is now organized in six units: RoRo, Cruise and Navy; Container, Bulk and Tank; Offshore; Multipurpose and General Cargo; Shipyard Solutions; Services.

- The reorganization will also make it easier to utilize group-wide synergies through integrated value chains and contribute to cost reductions, says Andersson.

Review of business units

In the following, the 2013 figures are adjusted according to the new reporting structure with six business units and are directly comparable to the Q3 figures of 2014.

RoRo, Cruise and Navy

The business unit provides complete cargo handling solutions for car carriers, cruise vessels and navy vessels, as well as terminal loading and passenger systems. The portfolio includes all kinds of RoRo-equipment, ramps, covers and doors, liftable decks, passenger gangways and linkspan systems as well as systems for auto mooring.

EBITDA for Q3 was MNOK 21.4, up from MNOK 0.3 in the corresponding period last year. Year-to-date profit also improved considerably, from MNOK 41.7 in the first nine months of 2013 to MNOK 51.9 this year. Q3 revenue was MNOK 154, up from MNOK 128 in the same period last year. The main reason for both profit and revenue improvement is deliveries of advanced equipment to car carriers. The TTS Group is the market leader in the PCTC segment and now reaps the fruits of good customer relationships through several repeat orders.

The order intake also shows positive signs within the cruise segment, where TTS has entered a number of agreements on deliveries of side ports. The order backlog of the business unit increased from MNOK 687 in Q3 2013 to MNOK 866 this year.

Container, Bulk and Tank

The business unit offers complete cargo handling solutions for container vessels, tankers and bulkers; including winches, cranes and hatch covers.

The unit reports an EBITDA loss of MNOK 0.9 for Q3, yet a substantial improvement compared to a loss of MNOK 24.3 in the corresponding quarter the previous year. Total revenue was MNOK 92 compared to MNOK 87 in Q3 2013. Year-to-date revenue is MNOK 317, down from MNOK 368 in the first nine months of 2013. Year-to-date operating result is MNOK 2.7, up from an operating loss of MNOK 18.7 per Q3 last year.

The positive EBITDA-effect of TTS' joint ventures in China is MNOK 7 in Q3 and MNOK 11 so far this year.

The order backlog of the business unit, which includes 50 % of the order backlog from the joint ventures, has grown strongly; from MNOK 1 028 in Q3 2013 to MNOK 1 443 this year. The increase is in its entirety explained by a strengthened order reserve in the Chinese joint ventures.

- In China, we expect improved margins for deck equipment. Our margins for deck equipment in Korea are still under pressure due to a market price erosion triggered by increased competition from Korean players. To meet this challenge head on, we transfer core parts of our deck equipment operations from Germany to Korea and refocuses the entire internal value chain. This process will be completed by the end of 2015, says Andersson.

Offshore

The offshore unit delivers all types of cranes for offshore vessels and offshore installations - focusing on offshore cranes and AHC cranes - in addition to hatch covers, moon pool hatches and similar equipment.

The business unit improves its EBITDA from a loss of MNOK 39.5 million in Q3 2013 to a loss of MNOK 26.4 in Q3 this year. Q3 revenue amounted to MNOK 111, a reduction compared to MNOK 149 in Q3 the previous year. The operating income year-to-date also decrease substantially, from MNOK 465 in 2013 to MNOK 363 so far this year. The operating loss after the first nine months of 2014 is MNOK 82.5, compared to a loss of MNOK 38.7 in the first three quarters of 2013.

- The results are far from satisfactory, and due to substantial lead-time in a number of ongoing projects, we will not immediately see the full effect of our initiatives. We also see that this market continues to be challenging, says Andersson.

The order backlog was impacted by weaker activity in the drill ship market and totalled MNOK 440, down from MNOK 638 in Q3 last year.

Multipurpose/General Cargo

The business unit's offerings include heavy lift cranes , mooring winches , hatch covers and side -loading systems for multipurpose vessels and cargo ships .

The Q3 EBITDA loss amounted to MNOK 6.1, yet a substantial improvement from a loss of MNOK 19.6 in the same period in 2013. Q3 revenue reflects the low activity within this segment, and was a modest MNOK 28, down from MNOK 55 last year. Total revenue so far in 2014 is dramatically down from MNOK 366 last year to MNOK 91. Operating loss for the year-to-date is MNOK 30.8, compared to a loss of MNOK 21.5 in the first nine months of 2013.

The market for heavy-lift cranes has been challenging for some time, but currently shows signs of improvement. TTS has experienced a high order intake this summer and has signed a range of contracts for deliveries of multipurpose cranes to Chinese shipyards. The order backlog in Q3 2014 was MNOK 443, up from MNOK 141 in 2013, which is considerable relative to the business unit's size.

- The market performance of the business unit in Q3 is gratifying, but it will still take some time before the operating results reflect the strong order intake, says Andersson.

Shipyard Solutions

The business unit provides production lines and systems for cargo handling to shipyards and other industries, focusing on transfer systems and solutions for docking and launching.

Q3 EBITDA increased from MNOK 2.7 million in 2013 to MNOK 7.1 this year. Total revenue increased in the same period from MNOK 31 to MNOK 55. Year-to-date revenue and profit is MNOK 139 and MNOK 5.4 respectively, compared to MNOK 110 and MNOK 8.4 last year. The order backlog decreases somewhat from MNOK 358 in Q3 2013 to MNOK 310 this year, but is still considerable given the revenue of the business unit.

- We are pleased with the strong positon we have taken in the shiplift market, where we have won all new contracts the last couple of years, says Andersson.

Services

The business unit offers a complete range of service and maintenance solutions, including spare parts, service interval agreements and lifetime services.

The profitability development within the business unit is sound, with an EBITDA of MNOK 13.1 in Q3 2014 compared to MNOK 6.1 in the corresponding period the previous year. Sales are somewhat down compared to Q3 2013; from MNOK 115 to MNOK 105. Year-to-date revenue amounts to MNOK 368, an increase of MNOK 36 compared to 2013. Operating profit so far this year is MNOK 32.4, up from MNOK 25.4 the first nine months of 2013.

The service and maintenance market is currently relatively weak, largely due to low rates in some key shipping segments.

Outlook

The comprehensive turnaround implemented to improve profitability is beginning to show results and will continue at undiminished force throughout the remainder of 2014 and 2015.

- We expect further improvement in our operating performance and believes that the new corporate model will have a positive impact on TTS ' ability to meet market needs and thus also on the company's future results , says Andersson .

Although there still are market challenges within certain sectors such as offshore, the general outlook within TTS' main market segments is fairly good.

- We experience great interest in our system solutions and complete ship type packages , and believe that our current restructuring forms a good basis for sustained and profitable growth , says Andersson .

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