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WIKI ANALYSIS
FMC Technologies (FTI) is a company that designs, manufactures and services technologically systems in the oil and gas industry. Their business segments are Energy Systems, FoodTech and Airport Systems.[1]
From 2003 to 2007, FTI's total revenue increased at an average rate of 21%. FTI net profit increased by 340% from 2003 to 2007. Their highest profit marign was in 2006 when their total revenue increased by 20% to $3755.6 million and net profit increased by 160%[2]. This was due to high demand for equipment and systems, especially subsea systems, used in the major oil and gas producing regions throughout the world and high oil and gas prices in relation to historical levels.[3]
On 16 Jan 2009, FTI struck a $140 million deal with BP PLC to make and supply subsea equipment for a development located off the shore of Angola. The deal will allow FTI to increase their portfolio in subsea systems business.[4] Subsea systems represented approximately 49%, 47%, and 45% of FTI consolidated revenues in 2007, 2006, and 2005, respectively.[5]
Company Overview
FTI design, manufacture and service technologically sophisticated systems and products such as subsea production and processing systems, surface wellhead production systems, high pressure fluid control equipment, measurement solutions, and marine loading systems for the oil and gas industry.[5]
Financial Analysis
In third quarter of 2008, FTI had a 30% increased in total Revenue to $3,345.8 million compared to third quarter earnings in 2007. Their net Income also increased by 26% to $270.0 million.[6] This was largely due to a $212.4 million increased in Energy Production Systems thanks to revenue from strong backlog position in Subsea at year end 2007.[6]
In 2007, FTI total Revenue was $5,380 million, net income $390 million and profit margin 7.2%. Their total Revenue increased by 22.8% to $859.8 million due to high oil and gas prices relative to historical levels, and hence created incentives for investment in the energy industry.[7]
In 2006, total Revenue increased by $631.2 million. Energy Production Systems businesses led the growth with a $479.0 million increase. This was due to high demand for equipment and systems, especially subsea systems, used in the major oil and gas producing regions throughout the world.[3]
Business Segments
FTI 3 business segments are Energy Systems, FoodTech and Airport Systems.[6]
In 2007, Energy Systems total revenue are made up of the Production and Processing Systems. Energy Production earned $2882.2 million and Energy Processing earned $767.7 million.Their combined net income was $430.4 million. [2]
Energy Production Systems provides services used by oil and gas companies involved in land and offshore, including deepwater, exploration and production of crude oil and gas.[5] Its revenue comprised approximately 62%, 60% and 57% of our consolidated revenue in 2007, 2006 and 2005, respectively. [5]
Energy Processing Systems designs and manufactures technologically advanced high pressure valves and fittings for oilfield service customers. Its revenue comprised approximately 17%, 18% and 17% of our consolidated revenue in 2007, 2006 and 2005, respectively.[8]
In 2007, FoodTech total revenue was $593.0 million and net income was $56.1 million.[2] Its revenue increased by $94.7 million compared to 2006 largely thanks to increase in food processing market, sales in freezing equipments and foreign currency translation.[9] FoodTech produces systems used for fruit juice, frozen food, shelf-stable food and convenience food preparation for the food industry. FoodTech revenue comprised approximately 13%, 13% and 16% of our consolidated revenue in 2007, 2006 and 2005, respectively.[10]
In 2007, Airport Systems total revenue was $383.7 million and net income was $31.8.[2] Airport Systems supplies passenger boarding bridges, cargo loaders, and other ground support products, as well as airport management services. Its revenue increased by $39.7 million compared to 2006 due to higher air traffic.[9] Airport Systems revenue comprised approximately 8%, 9% and 10% of our consolidated revenue in 2007, 2006 and 2005, respectively. [11]
Geographic Regions
FTI business are largely located in United States of America and Norway. The Other Countries are fragmented and adds up to about 90 different countries. The sales revenue were identified based on the location where our products and services were delivered.[12]
Key Trends and Forces
Ongoing Subsea project is driving force for growth
As mentioned, Energy Production Systems’ revenue was $212.4 million higher in the third quarter of 2008 compared to the same period in 2007 and it was driven by revenue in Subsea operations -- operations to extract oil and gas below the ocean floors-- at year end 2007.[6] On 16 Jan 2009, FTI struck a $140 million deal with BP PLC to increase their portfolio in subsea operations located off the shore of Angola.[4] The deal will allow FTI to increase their portfolio in subsea energy exploration business. This trend in production is due to the continued high demand for energy, customer exploration and production activities. They continue to be focused in remote deepwater locations with complex recovery challenges. This trend has also led to new and ongoing projects located in the North Sea, in the Gulf of Mexico and offshore Brazil.[6] Furthermore, on 26 Dec 2008, FTI acquired a 45% stake in Schilling Robotics LLC in a move to expand its subsea energy exploration business further. The $116 million deal will allow FTI the right to buy the rest of Schilling Robotics between 2012 and 2014.[13].
Foreign currency translation effect on Energy Production Systems’ revenue
As mentioned, FTI is a global that reaches out to over 90 different countries. In 2007 compared to the same period in 2006, out of the $632.7 million increased in revenue, $200 million were due to foreign currency translation. The notable projects that had large foreign currency translation were located offshore West Africa, the North Sea, in the Gulf of Mexico and offshore Brazil. [14]
Demands for FTI operations depends on oil and gas industry
Energy Systems businesses are substantially dependent on conditions in the oil and gas industry and that industry’s willingness and ability to spend capital on the exploration for and development of crude oil and natural gas. The level of spending is generally dependent on current and anticipated crude oil and natural gas prices, which have been volatile in the past. In 2007, although total revenue was highest ever, their profit margin fell from 7.4% to 6.6%. This was largely due to a 20% increase in total costs and expenses from $3451.0 million to $4164.7 million. [15] .
Competition
Energy Production Systems competes with other companies that supply subsea systems, surface production equipment, and separation systems, and with smaller companies that are focused on a specific application, technology or geographical niche in which they operate.[8] While FoodTech competes with a variety of local and regional companies typically focused on a specific application, technology or geographic area, and with a few large multinational companies.[10] Lastly, Airport Systems competes with a variety of local and regional companies typically focused on a specific application, technology or geographic area, and with a few large multinational companies, including ThyssenKrupp Airport Systems, S.A. and Téléflex Lionel-Dupont (TLD).[11]
Cameron Corporation (CAM) and Emerson Electric Company (EMR) are their main competitors- Cameron Corporation (CAM) - Cameron International Corporation provides flow equipment products, systems, and services to oil, gas, and process industries worldwide. It operates in three segments: Drilling and Production Systems, Valves and Measurement, and Compression Systems. Their business segments include spare parts, technical services, repairs, overhauls, and upgrades. The company was founded in 1833 and is headquartered in Houston, Texas. In 2007, CAM had revenue of $5.67 billion, net profit of $570 million and positive operating cashflow of $796 million.
Emerson Electric Company (EMR) - Emerson Electric Co., a diversified global technology company, engages in designing and supplying product technology and delivering engineering services to various industrial and commercial, and consumer markets worldwide. The company operates through five segments: Process Management, Industrial Automation, Network Power, Climate Technologies, and Appliance and Tools. In 2007, CAM had revenue of $24.8 billion, net profit of $2.45 billion and positive operating cashflow of $3.29 billion.
| Company | Total Revenue (in $ million) | Net Income (in $ million) | Profit Margin |
| FMC Technologies (FTI) | $4,615.4 | $302.8 | 6.5% |
| Cameron Corporation (CAM) | $5,670 | $570 | 10% |
| Emerson Electric Company (EMR) | $24,810 | $2,450 | 10% |
References
- ↑ ROP 2007 10-K, Part I, Item 1, "Business", Page 17.
- ↑ 2.0 2.1 2.2 2.3 2.4 ROP 2007 10-K, Part II, Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations", Page 22.
- ↑ 3.0 3.1 ROP 2006 and 2007 10-Q, Part I, Page 21.
- ↑ 4.0 4.1 BusinessWeek - FMC Tech buys 45 pct stake in Schilling Robotics
- ↑ 5.0 5.1 5.2 5.3 ROP 2007 10-K, Part I, Item 1, "Business", Page 3
- ↑ 6.0 6.1 6.2 6.3 6.4 6.5 ROP 2006 and 2007 10-Q, Part I, Page 16.
- ↑ ROP 2006 and 2007 10-Q, Part I, Page 20.
- ↑ 8.0 8.1 ROP 2007 10-K, Part I, Item 1, "Business", Page 5
- ↑ 9.0 9.1 ROP 2007 10-K, Part I, Item 1, "Business", Page 24
- ↑ 10.0 10.1 ROP 2007 10-K, Part I, Item 1, "Business", Page 6
- ↑ 11.0 11.1 ROP 2007 10-K, Part II, Item 7, " Management’s Discussion and Analysis of Financial Condition and Results of Operations", Page 7
- ↑ 12.0 12.1 ROP 2007 10-K, Part I, Item 8, "Financial Statements and Supplementary Data", Page 65.
- ↑ BusinessWeek - FMC strikes $140 million supply deal with BP
- ↑ ROP 2006 and 2007 10-Q, Part 8, Financial Statements and Supplementary Data, Page 23.
- ↑ ROP 2006 and 2007 10-Q, Part 8, Financial Statements and Supplementary Data, Page 35.
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