INTERNATIONAL construction and shipbuilding group Kvaerner has returned to profit in the first quarter of the year.

The Anglo-Norwegian business, which employs more than 1,500 people in the Tees Valley, saw operating profits in the three months to March 31 rise to £13.7m, compared to a loss of almost £30m in the previous quarter.

The figures represent something of a recovery for the group, which narrowly avoided bankruptcy last year, by merging with Norwegian rival Aker Maritime.

The merger, which was sealed at the end of last year, was a lifeline for the struggling business, which in November was days from collapse when it ran out of cash.

The merger led to several changes to the operational structure of the group, including a combination of the oil and gas businesses of Aker Maritime, the establishment of a jointly owned shipyard management company, and the move of the head office from London to Oslo.

Three of Kvaerner's four businesses, including Kvaerner Engineering and Construction (E&C), which employs the majority of staff on Teesside, reported increased operating profits in the first quarter.

Kvaerner E&C reported an operating profit of £1.5m in the first three months of the year. Aker Kvaerner reported an operating profit of £7m, while the group's shipbuilding operations reported operating profits of almost £12m.

Only Kvaerner Pulp and Paper reported losses of £4.7m.

The financial restructuring of the group was successfully completed in the first quarter of the year.

Debt at the group has been reduced to £81m at the end of March, from a figure of almost £550m at the end of 2001.

A spokesman said: "Coming out of a difficult year in 2001, the group has returned to profitability in the first quarter of 2002.

"The new financial and industrial structure of the group represents a sound foundation for continued operational improvement.

"Management is spending more time with key customers to ensure that Group priorities are aligned with customer requirements."

He added: "Operational performance is expected to remain relatively strong in Aker Kvaerner for the rest of the year, while the position in Kvaerner E&C and Kvaerner Pulp & Paper is expected to gradually improve.

"The Kvaerner shipyards will produce varying results in the coming year.