CGG Second Quarter 2004 Consolidated Results
September 02 2004 - 1:00AM
PR Newswire (US)
CGG Second Quarter 2004 Consolidated Results Net Loss of Euros 10.2
million, PARIS, September 2 /PRNewswire-FirstCall/ -- - ONEX joins
CGG as financial partner and future shareholder in support of this
acquisition project Compagnie Generale de Geophysique (ISIN:
FR0000120164 ; NYSE : GGY) ) published today its 2nd quarter 2004
unaudited results. Q2 2004 Highlights: Revenues for the second
quarter of 2004 were stable in Euros and up 5% in US$ compared to
the second quarter of 2003. Group operating result at break even
compared to Euros 8.5 million in Q2 2003 due to historically low
prices in Geophysical Services in early 2004 and a negative EUR/$
exchange rate effect estimated at Euros 6 million. Sercel operating
margin of 16%. Q2 loss of Euros 10.2 million compared to a net
profit of Euros 6.5 million in Q2 2003. Increase in backlog due to
an improvement in the exclusive offshore market will favourably
impact the second semester. Chairman and CEO Robert Brunck stated:
"The loss recorded during the second quarter is the result, as
already announced, of prices being at historically low levels in
marine acquisition. However, we have noticed a significant
improvement in this business segment during the last few months and
our recent award in India is an illustration of this. Our
multi-client business will benefit during the second semester from
the strong interest in round 6 in Brazil on the part of the oil
companies. Sercel, with its high backlog, will in 2004 continue to
show a robust increase in revenues, further develop its market
share and maintain its good level of profitability. The market
environment is therefore definitely leading in the right direction
and should positively impact our activities in the next 12 months.
Industry consolidation however remains the key element of any
sustainable turnaround in our sector's profitability. In that
respect, the proposal that we make to PGS is the natural conclusion
of the process we started two years ago with our initial equity
stake of 7,5% and our ensuing position as supporting shareholder
during the financial restructuring which followed. It constitutes a
clear evidence of our determination to consolidate the seismic
industry and to create value for our respective shareholders".
Consolidated Statement of Earnings (in million ( French GAAP) of
Euros) At June 30th H1 2004 H1 2003 Q2 2004 Q2 2003 Operating
revenues 321.4 318.9 159.5 162.2 Operating profit 13.0 11.9 0.4 8.5
Income from equity 4.8 4.9 2.7 1.9 investments Net interest
expenses (11.7) (12.2) (5.4) (3.8) Exchange gains (losses) 4.1 6.1
(0.6) 5.3 Income taxes (9.6) (6.7) (4.7) (4.0) Goodwill
amortization (4.2) (3.0) (2.2) (1.5) Minority interest (0.5) 0.0
(0.4) 0.1 Net income (4.1) 1.0 (10.2) 6.5 Earnings per share in
(0.35) 0.09 (0.87) 0.56 Euro Average number of 11.680.968
11.680.718 11.681.218 11.680.718 shares Revenues: In a
predominantly US$ denominated market affected by a negative
exchange rate variation versus the Euro of 12% in one year, total
revenues for the first half 2004 were Euros 321 million (US$ 395
million), up 12% in US$ and 1% in Euros compared to the same period
last year (Euros 319 million, US$ 352 million). Total revenues for
the second quarter 2004 were Euros 160 million (US$ 193 million),
up 5% in US$ and stable in Euros compared to the same period last
year (Euros 162 million, US$ 184 million). Revenues per segment:
First half 2004 revenues for Geophysical Services were Euros 170
million (US$ 209 million), down 21% in US$ and down 29% in Euros
compared to the same period last year. This decrease is entirely
attributable to the change in perimeter of the land seismic
services activity decided at the end of 2003 and implemented early
2004. For the second quarter 2004, Geophysical Services revenues
were Euros 87 million (US$ 106 million), down 19% in US$ and down
24% in Euros compared to the same period last year (Euros 115
million, US$ 131 million). Sercel's Geophysical equipment total
sales for the first semester 2004 were Euros 160 million (US$ 196
million), up 101% in US$ and 81% in Euros compared to the same
period last year (Euros 88 million, US$ 98 million). This growth is
based 75% on organic activity and 25% on the impact of recent
acquisitions. Sercel's Geophysical equipment external sales for the
first half 2004 were Euros 151million (US$ 186 million) up 114% in
US$ and 93% in Euros compared to the first half of 2003 (Euros 78
million, US$ 87 million). This increase reflects the very good
performance of Sercel's market, particularly the land equipment
market and also the recovery in the marine equipment market
Sercel's Geophysical equipment total sales for the second quarter
2004, were Euros 77 million (US$ 93 million), up 63% in US$ and 53%
in Euros compared to the second quarter 2003 (Euros 50 million, US$
57 million). Sercel's Geophysical equipment external sales for the
second quarter 2004 were Euros 72 million (US$ 88 million) up 64%
in US$ and 54% in Euros compared to the second quarter of 2003
(Euros 47 million, US$ 53 million). Operating Result: The Group
operating result for the first half of 2004 is a Euros 13.0 million
profit compared to a Euros 11.9 million profit in the first half of
2003. The operating result for Geophysical Services for the first
half of 2004 is a loss of Euros 18.1 million compared to a loss of
Euros 1.1 million in the first half of 2003. The operating result
for Sercel for the first half of 2004 is a profit of Euros 33.8
million, (21% operating margin), compared to a profit of Euros 16.6
million in the first half of 2003 (19% operating margin). The Group
Operating Result for second quarter 2004 is at break-even compared
to a profit of Euros 8.5 million for the second quarter of 2003.
The operating result for the Geophysical Services segment for
second quarter 2004 is a loss of Euros 10.7 million compared to a
loss of Euros 2.3 million for the same quarter in 2003. The
operating result from Sercel for second quarter 2004 is a profit of
Euros 12.5 million (16% operating margin) compared to a Euros 11.4
million profit for the comparable period of 2003. The decrease in
the second quarter 2004 operating performance results principally
from the negative impact of exclusive marine acquisition prices
back to the historical low levels of 1999. In addition, the land
acquisition and the processing-reservoir segments have operated in
a very difficult market during the period, with a limited number of
bids and fierce competition. Multi-client after-sales in Q2 2004
were Euros 18.5 million, up 68% compared to Q1 2004 and up 80%
compared to the same period last year. At the end of June 2004, the
net book value of the marine multi-client library was Euros 146.6
million marking a decrease compared to end of Q1 2004. The
multi-client segment had a net positive cash flow of Euros 13.1
million during the first semester. Sercel, in an improving land
equipment market, achieved a good level of profitability with an
operating margin above 16%. Segment Information: at June 30th H1
2004 H1 2003 Q2 2004 Q2 2003 Operating revenues Services 171.5
241.2 87.5 115.5 Products 159.7 88.2 76.9 50.5 Elimination (10.1)
(10.5) (4.9) (3.8) Total 321.4 318.9 159.5 162.2 Operating profit
(loss) Services (18.1) (1.1) (10.7) (2.3) Products 33.8 16.6 12.5
11.4 Corporate (5.8) (5.3) (3.3) (2.6) Elimination 3.1 1.7 1.9 2.0
Total 13.0 11.9 0.4 8.5 Operating Result Before Depreciation and
Amortization (ORBDA): The Operating Result Before Depreciation and
Amortization, "ORBDA", previously denominated "Adjusted EBITDA" in
our previous financial reports, is defined as operating income
(loss) excluding non-recurring revenues (expenses) plus
depreciation, amortization and additions (deductions) to valuation
allowances of assets and add-back of dividends received from equity
companies. The ORBDA for the first half 2004 is Euros 71 million,
22% of revenues. Summary of financial flows: at June 30th H1 2004
H1 2003 Q2 2004 Q2 2003 Cash flow from operations* 60.5 118.7 20.6
70.5 Capital expenditure (25.3) (18.6) (12.2) (9.2) Investment in
library (27.4) (66.7) (9.4) (34.4) (*) after change in working
capital Net Profit: The net Group consolidated result for the
second half of 2004 is a Euros 4.1 million loss, compared to a
Euros 1.0 million profit for the first half of 2003. The net Group
consolidated result for the second quarter of 2004 is a loss of
Euros 10.2 million compared to a profit of Euros 6.5 million for
the second quarter of 2003. at June 30th H1 2004 H1 2003 Q2 2004 Q2
2003 Net Result (4.1) 1.0 (10.2) 6.5 Earnings per share (EUR)
(0.35) 0.09 (0.87) 0.56 Number of shares 11.680.968 11.680.718
11.681.218 11.680.718 Shareholder Equity and Net debt: As of June
30th 2004, net debt stands at Euros 163.6 million (US$ 198.9
million), representing 41% of equity (Euros 399 million). Net cash
available at the end of June 2004 was Euros 75 million. at June
30th H1 2004 End of 2003 Shareholders' equity 398.9 396.6 Net debt
163.6 139.2 Gearing ratio 41.0% 35.1% As of September 1st 2004, the
Group Backlog was US$ 392 million, a record level and an increase
of 70% compared to last year. This increase is particularly
significant in the marine acquisition segment which will operate
with better prices during the second half of 2004. The entire CGG
fleet will work in an exclusive contract mode during the second
half 2004 as well as during most of the first semester 2005.
Strategic Development: CGG has sent today to the board of directors
of Petroleum Geo Services AS (PGS), company listed on the Oslo
stock Exchange (year 2003 total revenues of US$1,112 million out of
which US$728 million in seismic, http://www.pgs.com/) a proposal
for the purchase of PGS' seismic business, including in particular
its operational assets and its multi-client library. CGG is
proposing a purchase price of US$900 million, comprised of US$800
million in cash and US$ 100 million in CGG shares. The proposal is
currently intended to be financed through a combination of (i)
financing from ONEX (approximately US$400 million), CGG's financial
partner, and (ii) senior debt financing arranged by CGG's financial
advisers on this transaction (in addition to CARNEGIE), Citigroup
Global Markets and RBC CAPITAL MARKETS. The proposal and related
financing are subject to customary due diligence and certain other
conditions. ONEX has made an immediate commitment to CGG through an
initial investment of US$85 million in a 8 year, 7.75% convertible
subordinated non listed debenture with a conversion price of
US$60.7 per ordinary share corresponding to EUR50.25 at current
exchange rates. At CGG's option, CGG can satisfy the principal
amount of the debenture in CGG shares. Interest will be paid
quarterly and is payable, at CGG's option, in CGG shares. The
potential dilution following conversion of the bonds corresponds to
approximately 10% of future total equity. An Extraordinary
Shareholders Meeting should be convened towards the end of October
2004 to approve the terms of this transaction. The corresponding
filing document would be submitted for the approval of the French
market authorities (AMF). ONEX would be represented at the board of
directors of CGG by one representative and the number of board
members of CGG would be increased to 11. The US$85 million
investment is subject to confirmatory due diligence by ONEX, which
shall be completed prior to the Extraordinary Shareholder Meeting.
Additional convertible subordinated debentures of up to US$315
million intended to be provided by ONEX is contingent on the
execution of a definitive agreement by CGG with PGS and subject to
customary conditions as well as authorization by the competent
antitrust authorities. Also CGG may substitute in whole or in part
alternative sources of equity for this convertible debenture. The
conversion price is set at 110% of a prescribed average share price
preceding a final agreement, with a maximum of US$56.87 per
ordinary share. The final amount to be issued under this second
financial instrument if any, would depend on the final financial
parameters of the acquisition. Onex is a Canadian investment fund
created 20 years ago. Onex is located in Toronto and New York and
listed on the Toronto Stock Exchange. For more information on ONEX:
http://www.onex.com/ The information included herein does not
constitute an offer to sell or the solicitation of an offer to buy
any securities, nor the solicitation of any commitment or
indication to vote any securities. The information included herein
contains certain forward looking statements within the meaning of
Section 27A of the securities act of 1933 and section 21E of the
Securities Exchange Act of 1934. These forward-looking statements
reflect numerous assumptions and involve a number of risks and
uncertainties as disclosed by the Company from time to time in its
filings with the Securities with the Securities and Exchange
Commission. Actual results may vary materially. The Compagnie
Generale de Geophysique Group is a global participant in the
oilfield services industry, providing a wide range of seismic data
acquisition, processing and geoscience services and software to
clients in the oil and gas exploration and production business. It
is also a global manufacturer of geophysical equipment. Robert
BRUNCK, Chairman and CEO will comment on the results during a
public presentation today at 10 am; 10, avenue d'Iena (Hubert
Rousselier Amphitheatre) - Paris 16th. Copies of his presentation
for this conference will be posted on the company web site and can
be downloaded. An English language conference call is scheduled
today at 4:00 p.m. (Paris time) - 9:00 am (US CT) - 10.00 am (US
ET) To take part in the English language conference, simply dial
five to ten minutes prior to the scheduled start time. -
International call-in +1 719 457 2679 - US call-in (800) 500 01 77
- Replay (719) 457 0820 & (888) 203 1112 You will be asked for
the title of the conference: "CGG Q2 & Half-Year 2004 Results"
and the name of the Chairman of the Board of Directors: "Robert
Brunck". This conference will be broadcast live on CGG's website
and replays will be available for a week thereafter. DATASOURCE:
Geophysique CONTACT: Contacts : Christophe PETTENATI-AUZIERE
+(33)-1-64-47-36-75 Christophe BARNINI +(33)-1-64-47-38-10 Email :
Site internet : http://www.cgg.com/
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