Areva's ups and downs

Friday, 27 January 2012

A turbulent year for Areva has seen a new CEO, dramatic currency fluctuations and sales impacts from the Fukushima Daiichi nuclear accident but an increase in order backlog and only a fairly minor downturn in overall revenue.

While the company's total revenue was down 2.6% to €8.9 billion ($11.7 billion), the order backlog grew by 3.1% to €45.6 billion ($59.9 billion) according to a statement released yesterday.

In terms of revenue the mining group brought the best results - up 18% to €1.3 billion ($1.7 billion). Revenue was down for the front-end (12.6%), reactors and services (3.6%) and back-end business groups (6.7%) to €2.6 billion ($3.4 billion), €3.4 billion ($4.5 billion) and €1.7 billion ($2.2 billion) respectively.

The biggest movement by far in Areva's order book was in the reactor and services division - up by 25% on last year to €9.1 billion ($12 billion), mainly as a result of two contracts with EDF: €1.1 billion ($1.4 billion) for the replacement of 32 steam generators and over €600 million ($788 million) for renovating instrumentation and control systems at 1,300 MWe reactors. A contract with the Tennessee Valley Authority related to the completion of the Bellefonte nuclear power plant should amount to $1 billion over the life of the project. Apart from the back-end business group, up 3.7%, the other business groups all posted small drops in their order books of less than 4%.

Looking forward, Areva is likely to benefit from further EDF orders as it increases the life expectancy of its reactor fleet from 40 to 60 years. Speaking earlier this month EDF boss Henri Proglio outlined a €40 billion ($53 billion) spending program, with possibly €10 billion ($13.2 billion) more dedicated to improvements that the country’s regulator has insisted upon following the completion of stress tests.

Fukushima effect and foreign exchange

The accident at Fukushima Daiichi made its mark on the French nuclear giant, accounting for order cancellations worth €464 million ($610 million). Conversion operations were hit hard at Comurhex due to the drop off in deliveries to Japanese utilities whose reactors have been idled in the period following the accident. Production at this facility was suspended for two months without impacting customer deliveries. However the company also benefited from some new contracts such as that for the water treatment facility used for decontamination efforts at Fukushima.

In results for the first half of 2011, the company noted losses for mining and fuel of €191 million ($273 million) due to plunging demand from Japan and Germany. It also outlined its expectations that mandated safety improvements at reactors worldwide could amount to between €100-200 million ($140-280 million) per plant, from which it may secure some work.

Currency movements cost the company €116 million over the year ($153 million), largely a result of changes in the US dollar in relation to the euro. However this had minimal impact on results for the last quarter. The biggest impact took place in the mining business group where some €52 million ($68.4 million) was lost in foreign exchange. 

Luc Oursel, who took over as CEO in June last year, stated: "The growth of our backlog over a year marked by the Fukushima accident confirms the strength of the group's commercial presence alongside its customers. Similarly, the limited decline in revenue in 2011 illustrates the robustness of Areva's integrated business model – with the majority of our activity resting on recurring business generated in relation to our customers' nuclear installed base – and the development of our renewable energies operations."

While far smaller than its nuclear businesses, revenues from Areva's renewables division grew some 98.25% to €297 million ($390 million).

In December last year Oursel outlined a plan to mitigate expected losses and prepare for the long term. Executive bonuses were cancelled while wages were frozen. Between 1200 to 1500 job losses were earmarked for Areva's German production facilities – a result of that country's nuclear shutdown and phase-out policies.

Researched and written
by World Nuclear News