VARD 3Q results release

VARD’s diversification strategy yields strong order intake
·         Seven new contracts secured during 3Q 2016
·         9M 2016 new order intake of NOK 10.2 billion surpasses FY 2014 and FY 2015
·         Investments under way to support implementation of the new business plan
·         Reduced exposure to offshore, and to Brazil
Singapore, 11 November 2016 – Vard Holdings Limited (“VARD”, and together with its subsidiaries, the “Group”), one of the major global designers and shipbuilders of specialized vessels, today announced its financial results for the third quarter ended 30 September 2016 (“3Q 2016”) and nine months ended 30 September 2016 (“9M 2016”).
Steady new order intake from non-offshore markets
VARD’s diversification strategy continues to yield promising results, generating strong order flows in 3Q 2016. A total of seven new contracts were garnered by the Group during the quarter, in addition to the confirmation of an order for four ice-class expedition cruise vessels for French cruise company PONANT – which was previously communicated in the first half of the year (“1H 2016”).
The new contracts include two luxury cruise vessels for Hapag-Lloyd Cruises, an additional order for two Module Carrier Vessels (“MCV”) related to an earlier project for Topaz Energy and Marine (“Topaz”), and a new win from the National Maritime Carrier of the Republic of Kazakhstan, Kazmortransflot, for the design and construction of a further three MCVs.
Consequently, VARD’s new order intake amounted to NOK 3.3 billion in the past quarter, bringing the figure to NOK 10.2 billion for the first nine months of the year – exceeding total new order intakes for each of the prior two financial years (“FY 2014” and “FY 2015”).
Lower topline but improvement in EBITDA margin
VARD reported lower turnover of NOK 1.5 billion in 3Q 2016, representing a 34% decline from 3Q 2015, whereas 9M 2016 revenues came in at NOK 5.7 billion, down 27% from the previous corresponding period (“9M 2015”). The lower topline is mainly due to reduced workload at the European yards and the close-down of Vard Niterói in Brazil, where the Group has ceased all shipbuilding activities.
EBITDA before restructuring cost rose to NOK 33 million and NOK 101 million in 3Q 2016 and 9M 2016 respectively, versus NOK 467 million negative and NOK 356 million negative in the corresponding periods the year before. EBITDA margins improved to 2.2% in 3Q 2016 and 1.8% in 9M 2016, as compared to negative margins the year before. Restructuring costs of NOK 27 million and NOK 76 million were recognized during the quarter and for the nine-month period respectively.
VARD registered a net loss of NOK 104 million in 3Q 2016 and NOK 128 million in 9M 2016, compared to a loss of NOK 845 million in 3Q 2015 and NOK 1.1 billion in 9M 2015. Losses of NOK 80 million and NOK 96 million were attributable to equity holders of the Company for 3Q 2016 and 9M 2016 respectively. This translates to a cumulative loss per share of 1.36 SGD cents for the first nine months of the year, as compared to a loss 7.37 SGD cents the year before.
Cash and cash equivalents stood at NOK 525 million as at end September 2016. In terms of debt, total current liabilities decreased from NOK 16.5 billion at 31 December 2015 to NOK 13.1 billion at 30 September 2016, mainly due to a reduction in construction loans following the delivery of nine vessels in the first nine months of the year. Non-current liabilities increased from NOK 1.4 billion to NOK 1.7 billion during the same period.
As at 30 September 2016, the Group had an order book of 45 vessels, of which 37, or 82%, will be of VARD’s own design.
Strong yard utilization in Romania and Vietnam; reduced exposure to offshore and Brazil
In Norway, shipyard activity remains relatively low as several large Offshore Subsea Construction Vessel (“OSCV”) orders have either been delivered, or are in their final stages of outfitting, and cruise vessel hulls will not arrive for outfitting in Norway before the second half of 2017. To utilize excess capacity, the Norwegian yards have also turned to repair, conversion and upgrading work. Temporary layoffs have been undertaken to buffer the effects of low and volatile yard utilization.
The Romanian yards on the other hand are seeing an upswing in workload, with 13 of the 20 MCVs for Topaz to be built entirely at Vard Braila and Vard Tulcea. The yards are also seeing a greater amount of work from the sub-delivery of cruise vessel hull sections to FINCANTIERI. Hulls for VARD’s own cruise vessel projects will be built at Vard Tulcea. Significant investments in increased capacity and capabilities are under way in Tulcea to support the implementation of the new business plan. With a sharp pick-up in activity, both Vard Braila and Vard Tulcea are hiring again, following a period of downsizing and restructuring last year.
Vietnam continues to enjoy stable operations, with full yard utilization secured till the end of 2017. Work has commenced for the construction of the seven Topaz MCVs to be built at Vard Vung Tau. The yard is actively collaborating with the Romanian yards in sharing best practices and through joint project management in relation to the construction of the purpose-built MCVs.
Following the recent closure of the Vard Niterói shipyard, VARD is now concentrating all its Brazilian shipbuilding activities on Vard Promar. In August, the Group increased its ownership stake in Vard Promar to 95.15%. This provides for a more balanced financial structure and increases the Group’s strategic flexibility in Brazil. Meanwhile, work at the yard in relation to the remaining two Liquefied Petroleum Gas (“LPG”) carriers for Transpetro and two pipe-lay support vessels (“PLSVs”) for DOF and Technip is in progress. A major rightsizing process is ongoing at Vard Promar, with a strong focus on cost reduction and organizational development.
In VARD’s equipment and solutions business, Vard Electro clinched new order wins for the provision of electrical engineering services, and the installation of equipment on vessels in the UK and India. In addition, Vard Marine achieved a breakthrough when its design was selected for the US Coast Guard’s new Offshore Patrol Cutter (“OPC”) program. At the base of VARD’s aquaculture business in Norway, Vard Aukra secured new contracts and successfully delivered orders for fish feeding and live fish treatment barges during the quarter.
Exploration into new segments yields promising results
VARD continues to see promise in its diversification strategy, leveraging on its core competencies and relationships to tap on opportunities in non-traditional markets. With six vessels under contract, the Group has made strong inroads into the market for expedition cruise vessels, and the Norwegian yards are now gearing up for the outfitting work on the first projects in this segment.
Meanwhile, the Group is actively pursuing leads in the fishery, offshore wind and Offshore Patrol Vessel (“OPV”) sectors. The aquaculture business is also expected to grow, on the back of the recent acquisition of industry solution provider Storvik Aqua in October.
In the near term VARD does not expect a significant rebound in demand with respect to vessels for the offshore oil & gas market. The Group continues to work with clients on developing cost effective solutions addressing the industry’s challenges in a low-oil-price environment, without compromising innovation, performance, quality and safety.
Roy Reite, Chief Executive Officer and Executive Director of VARD, commented, “We are heartened that since the launch of our diversification plans at the start of 2016, we have made promising headway in several areas. As we build relationships with new clients and adapt to demands in new markets, we continue to focus on new business development to keep activities at our yards stable and maintain VARD’s position in a challenging phase for the industry.”
    © VARD