Good morning. Welcome to Aker Solutions presentation of second quarter results for 2017. My name is Bunny Nooryani. I'm the Director of Communications and Investor Relations. Very pleased to see you here today. With me here today is Luis Araujo, our CEO, and Svein Stoknes, our CFO. They will go through the main developments in the quarter. We'll also have time for a Q&A, and we can take some short media interviews with the press at the end. Before we get started, I'd just like to point to the nearest emergency exit, which is out through the glass doors here on your left-hand side. Do note that we don't have any fire drills planned today. Luis.
Well, good morning, and thank you for joining us here today. I'm pleased to be here with Svein to go through our results for the second quarter, which was yet another period of strong execution for Aker Solutions. As you can hear from my voice, I guess the Norwegian summer finally got to me, and I just hope that my voice lasts until the end. That's my main goal for the day. Let's start with the main developments. Market conditions remain challenging across the global oil and gas industry, but there are also positive signs. Break-even costs are continuing to come down, which increase the likelihood of more products being sanctioned. Tenant activity is good, and we are seeing a surge in demand for early-phase studies.
This can be seen as an indication of a pickup in activity ahead. Against this backdrop, we deliver yet another quarter of strong execution. Our major projects progress as planned globally, and we reach significant milestones. Just to give you some examples, two of our projects achieved first oil in the quarter, and these were the EnQuest Kraken development in the U.K. North Sea, where we have delivered the subsea production system. Also, the Statoil Gina Krog development offshore Norway, where we have provided detailed engineering, hookup, and commissioning services. Both of these projects were delivered with no major agency incidents, which very important for us and for the industry. We also this week completed the loading of the umbilicals for the Zohr gas development offshore Egypt.
At 180 km, this is the longest-ever umbilical system produced by Aker Solutions. The vessel was actually just going to some Norwegian channels, two nights ago, we are very proud of achieving that milestone. We have now successfully installed all 19 subsea manifolds at the giant Kaombo development offshore Angola, as well as 12 of the 65 subsea trees. Progressing quite well on that Total project in Angola. We are not resting there. We also seizing opportunities to grow our business. In April, we bought the Norwegian oil and gas service business of Reinertsen, Norway's third-largest offshore maintenance and modification supplier. The acquisition strengthens our leading position in this market. It also boosts our capabilities in subsea umbilicals, risers, and flow lines, the so-called SURF.
It provides in an order backlog containing key maintenance and modification contracts with Statoil. This includes a framework agreement for as many as 10 years with Statoil. The transaction follows the purchase in December of a majority stake in the Brazilian construction and assembly company, C.S.E. Mecânica e Instrumentação. Both acquisitions build on our strategy to expand our projects and service businesses in major markets internationally. I'm pleased to say that we are making good progress in integrating both C.S.E. and Reinertsen, and this is generating a significant synergies for us. In fact, all Reinertsen employees moved into Aker Solutions offices in June, and we have already secured new work under the framework agreement Reinertsen had with Statoil. Very positive for us.
The quarter also saw the continuation of our company-wide program to keep improving operations and bringing down costs. The program, called The Journey, is making good headway and is now more than 80% complete. We are also seeing the benefits of our new organization structure of five delivery centers, which we introduced late last year. The new setup is streamlining and strengthening how we operate and interact with our clients. Together, all of these improvements helped support our margins in the quarter, even as the market slowed down, it caused a weakening of our bottom and top lines. Now, for the main numbers.
Our second quarter financial figures were revenue of NOK 5.4 billion, EBITDA of NOK 305 million, an EBITDA margin of 5.6%, excluding special items, the margin was 7.4%, and EPS was NOK 0.34. We had a solid financial position at the end of the quarter with a liquidity buffer of NOK 4.9 billion, this give us good flexibility going forward. Our order intake, very important these days and always, was NOK 3 billion in the quarter, bringing the backlog to NOK 30.7 billion. About half of these projects are for outside Norway. Just talk about new orders in the quarter. They include a contract to deliver three umbilicals and associated equipment to Eni's Coral South project.
This is Mozambique first offshore field development, we feel privileged to take part in developing the country's oil and gas industry. We also secure a framework agreement for as many as 10 years from Aker BP to provide engineering and procurement services for new offshore field installations. We won an order from Statoil to provide subsea equipment for this Snefrid Nord discovery discovery in the Norwegian Sea, which will be tied back to nearby Aasta Hansteen field. This contract not only secures continued activity at our yard in Sandnessjøen, it is also an example of the pickup in activity that we are seeing right now for tieback developments. Another recent example is an order from Aker BP for two subsea trees that we use to tie back the Kameleon and Storklakken projects to the Alvheim FPSO.
As you can see, we are populating all my speeches with very difficult Norwegian words for a Brazilian to say. Our Subsea Alliance with Aker BP, another important milestone. The Subsea Alliance we have with Aker BP and Subsea 7 just completed its first project, a tie-in of two subsea wells to the Volund field offshore Norway. Also positive is the strong interest we are seeing in our early phase capabilities. We won 41 study awards in the quarter. This gives us a total of 71 awards in the first half of this year for projects in Norway, the U.K., the U.S., Brazil, Australia, and Malaysia. Really global. That compares a record of more than 80 studies for all 2016. This year it's important to highlight also that 18 of those studies, the 71 we got, they are for field work.
Typically this type of rise in demand for early phase engineering phases is an early indication of a pickup in activity ahead. We also see an increasing tendency for our study and field work to be more closely tied to the potential next stages of a project. In other words, the engineering, procurement, and even construction and installation phases. Actually, this put us in a very strong position to secure future work at this project we're doing studies right now. I'm also pleased to say that we yesterday secured an order to deliver four subsea Christmas trees for the Visund and Fram Øst fields offshore Norway for Statoil, from Statoil. Well, as mentioned at the start of the presentation, we are making good progress on our company-wide improvement program, The Journey. Hope you have memorized the name by now.
The program targets a improvement in cost efficiency of at least 30% or NOK 9 billion in annualized savings by the end of this year, 2017. That compares with our 2015 costs and work volumes, of course. We have now achieved more than 80% of this goal. We're making these improvements by simplifying our methods, our organization set up and our geographic footprints. We are also standardizing our products and services. Let me give you some concrete examples to illustrate the program and the improvements. We have improved efficiency at our manufacturing facilities.
For example, our plant in Port Klang in Malaysia has reduced lead times on core components by 35% and brought down man-hours by as much as 10% by using LEAN manufacturing methodology and standardizing products. We have also significantly reduced assembly and testing hours on subsea trees by as much as 60% on some key projects. We have lowered the cost of a newer project by as much as 40%. Here's another fun fact because we talk about our own costs, our methods, our, the cost, but let's talk about what we can do for the clients. We set a new company record in the quarter, installing four subsea trees in just three days at the Troll field offshore Norway.
That beats a record we had before, which was actually four trees in four days. If you compare how that was done in the past, this is more significant. That's reducing a lot of cost for the clients in terms of installation. Continuing the theme of collaboration and helping clients, as you can see, we are continuously working to improve how we operate and make projects more cost efficient. Collaboration is key to this, and we are teaming up with others in our industry and exploring new business models to achieve even more. As you may recall, we formed a Subsea Alliance last September with Aker BP and Subsea 7. This collaboration recently completed its first project, the tie-in of two wells at the Volund field, more cheaply and quickly than originally planned.
Man-hours were reduced by 30% on the project, and the project was delivered 20% below target budget and about, very important, nine months ahead of comparable projects. We achieved all of this because of the alliance's groundbreaking collaboration model, where operating suppliers work as one integrated team to find most cost-efficient solutions, reusing solutions and best practices to save time and cut costs. That's, of course, a big change in an industry where expensive and bespoke solutions have long been the norm. Actually, this brings me to the next point. I'm excited today to announce that Aker Solutions has been selected to help drive standardization on an even wider industry level. The International Association of Oil & Gas Producers last month awarded our company a contract to provide project management and subject matter expert services for the phase II of the JIP33.
This is a joint industry partnership or project to standardize equipment and packages and to promote a more sustainable development of our industry. The IOGP members produce about 40% of the world's oil and gas resources, we are proud to be taking part of this important effort, which also ties with our company vision of driving sustainability in the industry. Now let's look ahead. The outlook for oil service remains challenging. Projects continue to be postponed, and there's a pressure on pricing, and the oil price remains volatile. I think we all know that by now. There are also signs of recovery. Improvement measures across the industry are having an effect, as I show some examples today. Breakeven costs are coming down, and this increase the likelihood of more projects being sanctioned this year.
This is particularly the case for brownfield projects as oil companies focus on optimizing output for existing fields. We continue to see health trending in our main in our main markets as we are currently bidding for contracts totaling about NOK 60 billion. The majority of this is for in subsea area, where we expect to see some key projects being sanctioned this year. Well, long term remain positive. Global energy demand is seen increasing, and this supports a positive long-term outlook for offshore and deepwater oil and gas, where we're well-placed. At the same time, few developments are becoming more complex, and we have the technology and capabilities needed to manage these challenges. In sum, we continue to deliver consistently strong execution and major cost efficiency improvements. This support, this is supporting our margins as we face continued market headwinds.
We have a solid financial position. We are seizing opportunities to grow our business, and we are taking part in strong collaborations to drive the changes and sustainable collaboration and development our industry needs to prosper. Thank you for listening. Svein, you go through the numbers in more detail.
Thank you, Luis. Good morning. I will now, as usual, take you through the key financial highlights of the second quarter, our divisional performance, and run through our financial guidance before we move on to Q&A. As always, all numbers mentioned are in the Norwegian kroner. As usual, let's start with the income statement. Overall operating revenues for the second quarter were down 22% year-on-year. The market slowdown continued to impact activity levels in both of our operating segments. This was partly offset by continued good progress on a number of key projects. Our reported second quarter EBITA was NOK 305 million. This included some special items, including restructuring and integration costs totaling NOK 81 million. These were mainly related to the recent acquisition of Reinertsen.
We also booked a provision of NOK 6 million for onerous leases related to idle office capacity, NOK 3 million in other costs, and a loss of NOK 4 million related to non-qualifying hedges. Excluding special items, the EBITA was NOK 400 million, compared with NOK 590 million a year earlier. This was equal to an underlying margin of 7.4% in the second quarter, which was down from 8.5% in the year-earlier period. A modest drop in margins considering a 22% drop in our revenues year-on-year. This remains clear evidence of our strong execution and our ability to continue to adjust our organization and our cost base to the continued subdued market conditions. We saw the same development for our numbers for the first half of 2017. Volumes declined year-on-year by 21% to NOK 10.6 billion.
We still delivered an underlying EBITA of NOK 763 million, with a margin of 7.2% versus 8.3% in the same period last year. Margin levels also continued to be impacted by a changing revenue mix, as we saw a more resilient activity level for brownfield-related activities. Our second quarter depreciation was slightly down from last year at NOK 206 million. Going forward, we continue to expect our underlying depreciation to be in the range of NOK 800 million -NOK 900 million for 2017. Our reported second quarter EBIT or operating profit was down year on year to NOK 99 million. Excluding all special items, EBIT was NOK 199 million, and the margin was 3.7% versus 5.7% last year.
This is in line with our underlying EBITDA development, but with a slightly higher relative depreciation burden versus last year. Excluding an unrealized hedging gain of NOK 12 million, net financial items were minus NOK 60 million in the quarter. We continue to see net financial items on an annual basis in the range of NOK 60 million-NOK 70 million per quarter, excluding the effect of currency and non-qualifying hedges. Our tax charge was equivalent to a rate of 34% in the quarter. Our view remains for average P&L tax rates to be in the mid-30% range going forward. We ended the quarter with a net income of NOK 33 million, equivalent to earnings per share of NOK 0.08. Excluding all special items, our underlying EPS for the quarter was NOK 0.34. Underlying EPS for the first half of 2017 was NOK 0.57.
Moving to our balance sheet and cash flow performance. On net current operating assets or working capital was minus NOK 454 million in the quarter, up from - NOK 974 million at Q1 as we trend towards our more normalized level of working capital over the next 12-18 months, as previously communicated. Due to our improvement programs and ongoing initiatives to optimize our cash flows, we remain comfortable that we will see a more normal working capital level of around NOK 1 billion-NOK 1.5 billion through 2018, or equivalent to about 5%-7% of revenue. We had net interest bearing items or net debt of NOK 1.7 billion at the end of the quarter, up from NOK 968 million at Q1, primarily reflecting the outflow of our working capital.
Our net debt to EBITA ended the quarter at 1.2 x. As previously communicated, we expect to continue to exceed our conservative target level of 1 x net debt to EBITA throughout 2017. Our total liquidity buffer remains strong at NOK 4.9 billion. This includes our revolving credit facility with leverage covenant at 3.5 x net debt to EBITA. This position continues to give us good financial headroom going forward. As a reminder, the credit facility is secured at very favorable terms. We have settled NOK 1.5 billion of debt that matured in June, drawing mainly on our available credit facility. As I mentioned at Q1, we also settled NOK 0.5 billion related to local debt in Brazil at the start of the year.
At the end of the second quarter, our underlying return on average capital employed was 7.7% versus 13% last year as our nominal rolling 12-month EBITA decreased year-on-year. On return on average capital employed, there is also the effect of recent investments that are yet to contribute to earnings. Our group capital employed was NOK 8.9 billion at the end of Q2. Of this, around NOK 800 million was linked to facilities and technologies that did not yet contribute to earnings. Our cash flow from operations in the second quarter was negative NOK 457 million, reflecting our outflow of working capital. Our investing cash flows totaled NOK 109 million in Q2. We still expect 2017 CapEx levels significantly lower versus 2016 and see overall CapEx and R&D at roughly 2% of revenues going forward with flexibility.
Cash flow from financing was -NOK 251 million in the quarter, mainly related to the settling of debt that matured in June. Now on to projects comprised of, as previously, our subsea and field design projects. Second quarter revenues were down 23% year-on-year. This was driven by lower activity levels that were somewhat mitigated by continued good progress on key projects. We also continue to realize significant benefits from our improvement programs in our projects portfolio. This continues to help offset some of the market headwinds. As a result, our underlying projects EBITA margin was only slightly lower year-on-year at 7% versus 8% last year, despite the significant drop in volume. Our projects EBIT margin was 3.8%, excluding special items, down from 5.2% a year ago.
First half year 2017 projects revenue declined 21% to NOK 8.3 billion, and we achieved an underlying EBITA of NOK 564 million. This was equivalent to a margin of 6.8% versus 7.8% in the first half of 2016. Again, thanks to our continuous improvement efforts, cost reductions, and strong execution. In terms of order intake for projects overall, our second quarter book-to-bill was flat versus last year at 0.6 x, and our backlog remains healthy at NOK 23.4 billion. This is equal to about 15 months of projects revenue. Now let's take a look at the key figures for subsea and field design within this reporting segment. Subsea projects revenue were down 44% year-on-year, due in particular to lower volumes in the North Sea, in Africa, and in Brazil, and as some projects neared completion.
Field design projects revenue were up 10% year-on-year, driven mainly by North Sea modification work awarded over the last 12 months. In terms of order intake, Subsea projects delivered at 0.5 x book-to-bill and field design at 0.7 x book-to-bill. Despite the tough market, tendering activity is still good. We are currently tendering for around NOK 50 billion of work overall in projects, with the majority being Subsea-related. We continue to see a challenging market for projects this year, especially within Subsea. For projects overall, we now see 2017 volumes down around 15% from last year, mitigated by a healthy activity level in field design, especially within brownfield. We continue to expect softer underlying margins year-on-year, driven by the changing revenue mix and continued challenging market conditions. Our services segment includes Subsea lifecycle services and production asset services.
The latter consists of MMO-related service work and also includes our recently acquired Brazilian maintenance and modification company, C.S.E. Services revenue were down 20% year-on-year. This reflects a subdued activity level in Subsea lifecycle services and a maturing project portfolio for production asset services. As of the second quarter, Subsea lifecycle services accounted for roughly 60% of services revenues, in line with the second quarter last year. The underlying EBITDA margin was NOK 147 million, with a margin of 12.7% versus 12.2% a year earlier. EBIT was NOK 101 million, with a margin of 8.8% versus 9.7% a year ago. Margins were driven by high installation and commissioning activity in Africa. We also saw a healthy resource utilization in some geographies and strong operational performance. For the first half of 2017, services revenue declined 24% to NOK 2.2 billion. We achieved an underlying EBITDA of NOK 299 million.
This was equivalent to a margin of 13.4% versus 11.4% in 2016, is thanks to a healthy activity mix, strong execution, and reasonably good utilization levels. The second quarter order intake was up year-on-year and totaled $0.4 billion for services overall. The Q2 book-to-bill was 0.3 x. Please note that a significant part of services order intake is short-cycled or book-and-turn in nature. Despite the tough market, tendering activity is good, we are currently tendering for around $9 billion of work globally. In terms of our outlook for services this year, we now see revenues down around 5% from 2016 levels. Despite this slight change in revenue and activity mix, we see underlying EBITDA margins remaining similar to 2016 levels. Now to the order intake and backlog performance for the group as a whole.
At NOK 3 billion, overall second quarter order intake was equivalent to a book-to-bill of 0.6 x, up slightly from the second quarter last year. Our backlog was NOK 30.7 billion at the end of the quarter. This is equivalent to around 1.4 x our revenues over the last 12 months. This also includes NOK 2.5 billion of backlog from the acquisition of Reinertsen. As mentioned earlier, overall tendering activity is good, though delays in project awards remain common, and we are engaged in tenders with an estimated sales value of around NOK 60 billion. As a reminder, our backlog does not include a significant part of our services business or potential growth or options on existing contracts. Finally, this slide sums up our financial guidance and some of our comments made on our near-term outlook.
Our outlook for 2017 remains unchanged for the group overall and still indicates overall revenues down by about 10%-15% this year versus last year, with healthy activity levels in the field design components of both projects and services. Our outlook for margins has not changed, and we continue to see the underlying EBITDA margin for the group overall slightly down from Q1 levels. To sum up, we ended the first half of 2017 by continuing to deliver strong project execution and a good underlying financial performance as we face persistent market headwinds. We are driving through our efficiency improvement program and are continuing to adjust our cost base to offset the impact from declining volumes. The improvement efforts, solid finances, and order backlog will stand us well going forward. Thank you very much.
That was the end of our presentation here today, and we will now open up for Q&A.
Thank you. As Svein said, we now have time for some questions from the audience. We plan to end the session today at 10:00 A.M. at the latest. I would ask that the audience here please does introduce itself using the microphones before they ask questions, and we have time for about one and one follow-up question, and then we also have a webcast audience. Let's start in this room. Haakon Amundsen.
Thank you. Haakon Amundsen from ABG. I guess with the backlog you have in place now, and you can see how the profitability is moving on the new tenders, is it possible to give any initial thoughts about 18? I mean, basically should we expect the EBITDA level in next year to be very different from 17?
Oh, if you take the five.
It's a little bit too early, yeah, to talk about 2018. What bodes well, as we mentioned, significant activity level front and significant activity level within brownfield and significant tender volumes. We're hopeful that some of these significant tenders will materialize, be sanctioned, and awarded in the near future. As it relates to margins on new work, I think you can see the evidence in our ability to adjust our cost base to the declining volumes over the recent two years. We have a very good momentum to continue this improvement program moving forward. Of course, this journey of driving through efficiency improvement in our organization is not gonna end as we deliver on our original target.
It's a continuous journey moving into next year.
Just adding up, yeah, for sure it's very competitive, the market. As being competitive, it's very competitive now. We have to continue our efforts to reduce costs to be able to increase or maintain those margins, for sure. As I said, the important thing for the clients, the costs are coming down, but most of the savings we are achieving have been passed to the clients and to the market. That's normal to any industry, we don't see anything new for us.
Okay. And just to follow up on, the oil price obviously been weak and, lately. If the oil price remains at these levels as we go into the budgeting period for the oil companies this autumn, do you expect that to materially change your outlook? Do you think, it's within the kind of band that you need to maintain your current outlook?
Well, sorry. We try not to focus too much on the oil price. Of course, it's for us, within the band and being considered. We don't take a overly optimistic view on oil price because we are focused on reducing costs to make sure that offshore competes with shale and traditional fields. I think we see that very positive. I think you'll see the break-even costs in some of the fields announced by the clients and by ourselves are quite important. Some of the plays, like the pre-salt in Brazil and the North Sea, they're showing some good profitability. We believe that the clients will maintain the projects. Also important point that we see the gas fields. The change to gas is very important for this planet.
We know that. We see big activity in gas, and that plays very well for us. We have a lot of technology for gas. Subsea compression, talk about even the new source like methane gas production. I think we see that we try to focus less on oil price and more on what we can do to help those projects get out of the ground.
All right. Thank you. That's it for me.
Thank you. There's the woman there. Thank you.
Thank you. Anne Gjøen, Handelsbanken. You mentioned an early indication of possible improvement, and you mentioned Norway in particular. Possible subsea production system of what could typically be seen in, like, Brazil and east, west of Africa. Could you give some specific comments on those areas if you see kind of the same progress in terms of reduced break-even costs there, for example?
Okay. I think you have your question has several angles I think, I'll try to cover them. I think that the industry is global, the, as we know, the cheapest oil price will be produced. There'll be competition who can make money at these current price levels. I think the market in Brazil, for us, we see as a huge potential for the future. In the short term, because they are changing regulations, there are new operators coming in, some of the exploration phases. As you know, Petrobras is divesting several assets, which is very important for the industry, for new players. In the short term, we see, of course, Libra and Total is very complimentary about the economicity of that particular play in the pre-salt.
we see that Libra being the near projects. in the long term, two, three years, we see that improving. in East Africa, West Africa, we see a lot, I mentioned about the gas plays. We see that moving. Not only East and West, we see new plays like Senegal, where BP is pushing very strongly and fast [the Total], for example. we see, you see Mozambique now finally moving. I think that's the mix there. The North Sea is, you know, we mentioned about the tiebacks in the brownfield, and that's where everything started because the clients are very worried about the timing.
I think the example we gave about reducing nine months for tieback, working together with Aker BP and Subsea 7 is a very good one to illustrate that we can make those projects bring oil faster and cheaper. North Sea for us are very important, very strong here. We have a very strong base installed, and we see, I mentioned a few awards today from Statoil tiebacks, four wells, and some for Storklakken . I think the North Sea also has a lot of potential for us.
Thank you. Another question in the back there.
Thanks. Magnus Olsvik, Swedbank. Just to follow up on the project and the NCS, can you comment on second half this year specifically, and the projects we know that are coming like Johan Castberg and the Njord Future ? What is your expectation of timing and your position?
I think our position, I think we're very strong. As I say, we are the company to be beaten here in our market. We know the clients. We're delivering very well to Statoil and the other operators in the NCS. We are tendering now, those projects are by now at Statoil is tendering a frame agreement now who's gonna cover all those projects we mentioned and some tiebacks as well. We expect everybody else expecting Castberg to be sanctioned by the second half, later in the year. I think our chances are very good, not only on subsea but also engineering and the follow-up, like we see on Sverdrup. [audio distortion] phase two who's supposed to be coming soon.
I think our position is very strong here.
On some of these prospects, we have been engaged for quite some time already doing study work and feeds work, et cetera. We're pretty well familiar with the prospects.
I think I'll have to say that we're very proud to have a big contribution for Statoil to lower the cost of that, those developments. We've been working with them for more than two years. Those projects we are on the front end that we're talking about, all the projects coming to front end, I think Castberg has been in front end for a couple of years now.
Another one from me, please. I guess for Svein. On the RCF, you're now drawing NOK 1.3 billion. Do you expect to keep that level going forward or utilize more or less?
We will have a closer look at the structuring of our balance sheet as we move into the second half of this year. It is a good flexibility, solid headroom. It provides us the liquidity buffer that we need as we speak. Come 2019, we have NOK 1 billion bond maturing, the revolver is expiring, so of course we're not gonna sit and wait until the parallel maturity is in 2019. We can take a closer look at that as we move into the second half of this year.
Thank you.
I don't see any further questions in here, go to our webcast audience. We have a question from Gregory Brown at Credit Suisse. Could you please give us an update on the status of your relationship with Baker Hughes? Is the alliance still relevant post the merger with GE?
Okay. Yeah, I think I mentioned last quarter that, due to the merger, the alliance has been put on hold. It's actually been suspended. We honestly don't see a future with that alliance with GE being a competitor to Aker Solutions. The alliance was based on exchange of information, technology, new technology. What we developed, and we developed quite a few new ideas, new products like Power Jump and Power Up and so forth. That remains, and you can market that, and we have the rights to do that. Under the separation agreement, the company, the change of control clause, tell that we cannot compete, both, we cannot compete, until December 2018 or January 2019. That is good to protect us.
Us, the part who has not taken over, can find a new partner in three months. We could find a new partner now, and we are looking deeply into that. For that particular alliance, there's no progress in the short term.
Another question from Gregory Brown. Despite the pickup in tendering activity, it looks to us like the industry has far too much capacity for the future market needs. We know TechnipFMC plans to close some facilities. When Subsea has also downsized. Do you feel the need to do more?
Okay, I can take that one. Interesting because I think people might think there is more capacity than there is. In fact, everybody has reduced capacity, reduced shifts. We had less facilities than our competitors, I would say. We had a big backlog to execute. What we've been doing, we have been reducing as I said, shifts. When we started the cycle, our three plants were working with three shifts full blast. Now that's no longer the case, and we have reduced to one shift. We have reduced capacity in a way. If you look at the industry, we can divide between technical capacity when people could do it and what people can do with the money now. The same goes for people resources.
I guess we all try to be more efficient with the people we have, but, depending of the peak of activity, I think human resource might be a challenge for this industry again. We as a company have protected our people. We have protected the execution, and I think we have a pretty good leverage if the volumes come to generate more business and more volumes and better margins. That's what we are hoping for the future. We have not planned any capacity reduction in short term.
Keep in mind, we have also, over the last two years invested heavily into our manufacturing facilities such that, our ability to do, much more optimal workload balancing has improved dramatically. It's the same processes, same machinery, same tooling. A huge advantage to us compared to the past where these facilities were, more, separate in terms of, capabilities.
Yeah, absolutely. Of course the, all the efforts being done in standardization in supply line solutions would make those plants more efficient as well. That's the other side of the, of the equation.
Another question, this time from David Farrell at Macquarie. Can you please reconcile the backlog position? It is unchanged quarter-on-quarter at NOK 30.7 billion . The order intake of NOK 3 billion was well below the reported revenue of NOK 5.4 billion .
Yeah, I think I addressed that in my presentation. You have about NOK 5.5 billion of revenue. You have an order intake of NOK 3 billion. As I mentioned, we inherited about NOK 2.5 billion of backlog from the acquisition of Reinertsen. If you have still a small delta there, it's related to translation effects, currency related in the backlog.
All right. That was the final question. I'd like to thank you for joining us here today and wish you a good summer.
Thank you. Thank you for the crew who made this possible here. You guys were flawless again. Thank you.