Norway: STX OSV Holds Its Ground Despite Soft Market Conditions

STX OSV Holds Its Ground Despite Soft Market Conditions

STX OSV Holdings Limited, a major global designer and shipbuilder of offshore and specialized vessels headquartered in Norway,  announced its results for the third quarter (“3Q 2012”) and nine months ended 30 September 2012 (“9M 2012”).

STX OSV Holds Its Ground Despite Soft Market Conditions

Financial and Operating Review

STX OSV generated revenue of NOK 2,457 million for 3Q 2012, representing a 27% decrease from the same period in 2011 (“3Q 2011”), mostly due to normal fluctuations in the project portfolio.

Revenues for 9M 2012 declined 7% from the same period in 2011 (“9M 2011”) to NOK 8,605 million.

The Group’s EBITDA margin (EBITDA to total revenue) came down from an exceptionally high base of 17.6% in 3Q 2011 to a still healthy 13.5% this quarter, reflecting generally stable operations particularly in Norway, Romania and Vietnam. The company’s cash position remained strong during the third quarter. Cash and cash equivalents stood at a solid NOK 2,347 million as at 30 September 2012 after taking into account payment of a 13 cents per share special interim dividend during the quarter.

STX OSV witnessed good yard utilization and productivity in Norway and Romania. In Romania the shipyards are running at high load, and an investment program that is underway to improve efficiency and throughput is progressing smoothly. In the Vietnam yard, workload is sub-optimal and is likely to remain so during parts of 2013. The recent slow-down in new orders is also likely to lead to periods of under-utilization in Norway next year.

Brazil Operations and New Yard Project

The Group successfully delivered one platform supply vessel (“PSV”) and one anchor handling vessel (“AHTS”) from the shipyard in Niterói in 3Q 2012. While the yard continues to experience project delays mostly due to general yard overload and constraints in the supply chain, improvement measures are being implemented and are beginning to pay off. The impact of the delays is being accounted for on an ongoing basis, but is expected to weigh down on average margins and revenues.

Meanwhile, work on the new yard in Brazil, STX OSV Promar, has progressed well and shipyard construction is at present more than 60% complete. Recruitment is ongoing, and shipbuilding activities are scheduled to begin in the second quarter of 2013, in line with previous estimates.

Orders, Deliveries and New Contracts for the Quarter

During 3Q 2012, two new vessel contracts were secured, amounting to total order intake of NOK 900 million. Notwithstanding the pull-back in order intake, the 9M 2012 order intake of NOK 8,229 million for 14 vessels is well ahead of the NOK 5,090 million for the same number of vessels for 9M 2011, reflecting an increase in average value per vessel as a result of larger and more complex projects, including several offshore subsea construction vessels (“OSCVs”).

With eight vessels having been delivered during the quarter, STX OSV’s total order book stood at 49 vessels and outstanding order book value was NOK 16,354 million as at 30 September 2012. More than half, or 27 of these vessels in the order book, will be of STX OSV’s own design. Since the end of 3Q 2012 STX OSV has firmed up additional contracts for two OSCVs for repeat customer Siem Offshore, and delivered three more vessels.

Outlook: Market Fundamentals in Place

Despite the Group seeing orders for medium-sized and high-end AHTS fall behind expectations on the back of lower-than-anticipated spot and charter rates, and the market for high-end PSVs currently being slow, the subsea construction market continues to drive demand for high-end vessels.

Mr Roy Reite, Chief Executive Officer and Executive Director of STX OSV, said: “Despite the soft market for some of our core products, STX OSV is still seeing a healthy level of project enquiries, especially in the offshore subsea construction vessel segment. Although we expect continued demand for high-end vessels in the subsea market to drive the industry for the rest of the year, we are concerned about the availability and cost of financing having an impact on order conversion rates.

Having said that, STX OSV remains confident in our fundamental ability to take advantage of the robust long-term demand for larger, more complex and customized vessels.”

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STX OSV, November 15, 2012