Shipbuilder Vard Holdings sank deep into the red in the second quarter as yard activity dwindled and a huge cost was booked for layoff payments.
But new orders won in the quarter signalled positive results in Vard's diversification away from the struggling offshore marine segment, the management said yesterday.
The impact of industry headwinds led to a net loss of 53 million Norwegian kroner ($8.46 million), in a massive reversal from 58 million kroner net profit a year earlier.
Revenue at the mainboard-listed Norwegian firm slid 10.9 per cent to 2.22 billion kroner in the three months to June 30.
The company's performance weakened as shipbuilding activity in its Norwegian and Romanian yards continued to cool, amid the global slowdown of the offshore oil and gas industries.
The impact was more acute in Brazil, where Vard shut down the Niteroi yard - one of its two facilities in the country - in the second quarter. Along with the downsizing in Europe, some 1,000 people were let go in the first half of this year.
AT A GLANCE
$350 million (-10.9%)
$8.46 million (not meaningful)
The resulting layoffs in turn forced Vard to fork out 38 million kroner in "restructuring cost" in the second quarter, mostly to cover Niteroi staff's termination benefits.
The earnings margin was also squeezed, as Vard made provisions to account for a contract cancellation by client Rem Offshore.
Another client, Harkand Group, had entered into administration and the vessel being built for it will now be put up for sale, executive vice-president Holger Dilling told reporters in a conference call.
For the first half of this year, revenue plunged 23.6 per cent to 4.24 billion kroner, with the net loss shrinking by 52.9 per cent to 16 million kroner. Despite the many bumps in recent months, the second quarter marked an "important milestone" for Vard, Mr Dilling stressed.
"During the quarter, order intake of over 6 billion kroner on 19 vessels was the confirmation that our diversification efforts are heading in the right direction and we are able to secure good, sizeable contracts even as the offshore market remains challenging," he said.
Four of the new orders are luxury expedition cruise vessels built for French cruise operator Ponant, while the remaining 15 are module carrier vessels for Topaz Energy and Marine. These projects, worth some 6.22 billion kroner, will lead to better utilisation of Vard's European yards, Mr Dilling added.
These new orders brought Vard's current order book to 39 vessels worth around 11.93 billion kroner, excluding the eight deliveries made so far this year.
In November, Vard announced the decision to broaden its portfolio in collaboration with Italian parent Fincantieri, a global brand in the cruise vessel industry.
Other innovations are also taking shape, such as the fish feed and treatment barrages delivered at Aukra in a bid to develop an aquaculture business, Mr Dilling said.
Net asset value of Vard was 49 cents per share as at June 30, down from 52 cents at the end of last year. Loss per share was 0.68 cent in the second quarter, compared with earnings of 0.85 cent a year earlier. Vard shares closed down 0.2 cent or 1.23 per cent at 16.1 cents yesterday after the results announcement.