VARD Reports Weaker Performance in Third Quarter
Vard Holdings Limited (“VARD”, and together with its subsidiaries, the “Group”), one of the major global designers and shipbuilders of offshore and specialized vessels, announced its results for the third quarter of financial year 2013 (“3Q 2013”) ended 30 September 2013.
Financial and operating review
VARD generated revenue of NOK 2.37 billion for 3Q 2013, representing a minor decrease from 2.46 billion for the same period in 2012 (“3Q 2012”). Operating profit for 3Q 2013 was NOK 72 million, down from NOK 301 million in the corresponding period of 2012. EBITDA margin (EBITDA to total operating revenue) for 3Q 2013 stands at 4.4%, down from 13.5% in 3Q 2012.
The weaker performance is mainly attributable to Vard Niterói in Brazil still suffering from an overload situation, leading to further delays and cost overruns. However, the Group’s margins represent a slight improvement over the previous quarter and the Group returned to a net profit for the period.
Operations in the European shipyards and in Vietnam were stable. VARD witnessed the successful deliveries of four projects from the Norwegian yards, including two complex non-offshore related vessels. Workload in Romania is gradually reverting back to normal, while the yard utilization level in Vietnam has improved on the back of winning a new contract.
The Group’s cash and cash equivalents stood at a healthy NOK 1.8 billion as at 30 September 2013.
Mitigating actions in progress at Vard Niterói
VARD continued to strengthen the project organization and reorganize production processes at the Niterói shipyard. As implementation is still in progress, results are taking a longer than expected time to show. While Vard Niterói has hit an all time high manning, with approximately 1,250 employees and 750 subcontractors at the yard, access to qualified personnel continues to be a concern.
Of the four delayed vessels in the order book in Niterói, the first one has reached about 95 percent completion, and is expected to be ready for sea trials shortly.
Key shipyard infrastructure at Vard Promar completed within 3Q 2013
Key shipyard infrastructure for the Group’s second yard in Brazil, Vard Promar, was completed in the third quarter. The ramp-up of production capacity at the new yard is underway, and the first blocks have been produced. Recruitment and training to integrate approximately 80 new employees per month into the organization are ongoing, and about 600 staff have been employed so far. Financial performance of the yard for 3Q 2013 is in line with previous estimates.
With shipbuilding works in progress at the new yard, VARD has put in place the foundations for sustainable operations and future growth in Brazil.
Largest order in Group’s history secured in 3Q 2013
In 3Q 2013, VARD secured the largest order in the Group’s history, worth a combined NOK 6.5 billion for four Pipe Lay Support Vessels (“PLSV”). The order not only extends the Group’s order book to 2016 – 2017 in both Europe and Brazil, but also reinforces key client relationships with repeat customers DOF and Technip, and strengthens VARD’s leading position in the global Offshore Subsea Construction Vessel (“OSCV”) market.
Following the delivery of four vessels during the quarter, VARD’s order book comprised 43 vessels as at 30 September 2013. Total order book value stood at NOK 19.6 billion, the highest since 2009.
Positive outlook for new order wins for 2013 – 2014
VARD holds a positive outlook for new order wins for the remainder of 2013 and going into 2014. Exploration and Production (“E&P”) spending continues to grow, driving demand especially in the market for subsea support and construction vessels. High growth areas such as the Barents Sea and other challenging environments call for new technology. Notwithstanding a highly competitive environment, VARD is currently seeing high tendering activity and continues to explore opportunities with existing and new clients, both within and outside of its core markets.
Press Release, November 06, 2013