Europe Equity Research
10 November 2009
GEPH.PA, GA FP
Q3 Results: EBIT 7% behind consensus but good
cashflow generation - ALERT
09 November 2009
Oil Services & Equipment
J.P. Morgan Securities Ltd.
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For Specialist Sales advice, please
Hamish W Clegg
• 3Q09 results. Group revenues were $731m, in line with JPM estimate
of $723m but behind Bloomberg consensus of $838m. Group EBIT
was $58m, 15% ahead of JPM estimate of $50m but 7% behind
Bloomberg consensus of $62m. Bloomberg consensus showed a very
wide range of estimates for EBIT of $49-77m. Net income was $12m,
in line with JPM estimates of $13m but 33% but lower than $18m.
• Service revenues -25% y/y, EBIT margin 5.8% acceptable. Service
revenues declined 35% y/y to $571m and EBIT was $33m for a margin
of 5.8%. As higher margin 2008 backlog came to an end, 3Q09 results
represents contracts that were signed in a lower pricing environment.
In our view, 5.8% EBIT margin is encouraging. We expect the focus
during the analyst call to be on the timing of when trough pricing is
expected in the market and when this will be realized in the P&L.
• Equipment division slightly disappointing: Sercel equipment
revenues were $203m, -35% y/y. EBIT declined to $37m for a margin
of 18.2%. This is slightly below the company guidance of maintaining
around 20% margins.
• Good cash flow generation. The company generated $148m of free
cash flow during the quarter due t