Shipbuilder Vard narrows Q4 and full-year losses as it pursues growth in new markets

Vard Holdings shipbuilding facilities around the world include the Brattvaag yard (pictured) in Norway.
Vard Holdings shipbuilding facilities around the world include the Brattvaag yard (pictured) in Norway. PHOTO: VARD HOLDINGS

SINGAPORE - Mainboard-listed shipbuilder Vard Holdings reported narrower net losses for its fourth quarter and full-year results on Wednesday (March 1) as it diversified into new markets.

For the three months to Dec 31, 2016, its net loss came to 67 million Norwegian kroner (S$11.2 million), 19 per cent less than the NOK 83 million for the year-ago period. It cut its full-year net loss to NOK 163 million, 73 per cent less than the NOK 603 million for 2015.

This translates to a cumulative loss per share of 2.29 Singapore cents for the full year, as compared to a loss of 8.22 cents the previous year.

Vard posted lower revenues of NOK 2.2 billion for Q42016 and NOK 7.9 billion in FY2016, representing year on year declines of 35 per cent and 30 per cent respectively. It said this was mainly due to lower activity levels at its European yards stemming from the low order intake in 2015, and the shutdown of Vard Niteroi in Brazil, where the group has ceased all shipbuilding activities.

Vard also recognised restructuring costs of NOK 29 million and NOK 105 million during the quarter and full year. These mainly related to termination benefits and statutory payments for temporary layoffs to do with the shutdown of its Brazilian yard. The impairment of shareholdings in associated ship-owning entities, reflecting the downturn in the offshore market, also hurt its FY 2016 results.

Cash generated from operating activities totalled NOK 617 million and NOK 767 million respectively for Q42016 and FY2016, as compared to negative NOK 51 million and negative NOK 1.2 billion in the corresponding periods the year before. Cash and cash equivalents stood at NOK 722 million as at Dec 31, 2016.

In terms of borrowings, total current liabilities decreased from NOK 16.5 billion at end-2015 to NOK 10 billion at end-2016, following a reduction in construction loans after the successful delivery of 13 vessels during the year. Non-current liabilities increased from NOK 1.4 billion to NOK 1.8 billion during the same period.

Vard said its order book grew by NOK 411 million over the fourth quarter, bringing its total to NOK 10.6 billion for the full year, surpassing new order intake for each of the previous two financial years. No new vessel orders were recorded in Q42016, as the contract for two luxury cruise vessels for Hapag-Lloyd Cruises, confirmed in October, was accounted for in the third quarter.

But Vard said new order intake was buoyed by a steady flow of variation orders, repair and conversion works, as well as its diversification into the aquaculture business. After the end of the fourth quarter, it secured contracts for two ferries and one krill fishing vessel, and a letter of intent for an expedition cruise vessel.

As at end-2016, the group had an order book of 41 vessels, of which 35, or 85 per cent, will be designed by Vard. The total order book value stands at NOK 12.6 billion, up 24 per cent from NOK 10.2 billion in FY2015.

Looking ahead, Vard said it has seen success in its diversification efftorts and will continue to grow its order book in the new cruise, fisheries and aquaculture segments.

In the offshore oil & gas market, Vard said few new building projects are currently being launched. For now, the group remains focused on the delivery of its current order book, and on reducing the risks still inherent to the existing offshore project portfolio.

Said Vard CEO and executive director Roy Reite: "We are grateful for the success we have seen in our diversification efforts, but we do not take our achievements for granted. In 2017, we remain sharply focused on laying the path for new business development to keep activities at our yards stable.