Vard posts 36.3% rise in Q4 profit but warns of weak outlook for new orders this year

SINGAPORE - Mainboard-listed Vard Holdings announced on Friday a 36.3 per cent rise in net profit for the fourth quarter ended December 31, 2014 to 154 million Norwegian kroner (S$27.5 million) from the same period a year ago.

The global designer and shipbuilder of offshore and specialized vessels said revenue for the quarter rose 45.5 per cent to NOK 4.5 billion, due to high activity at its yards and with subcontractors.

Full-year net profit dipped 2.2 per cent to NOK 349 million due to higher operational expenses despite the 15.8 per cent increase in revenue to 12.9 billion kroner.

Looking ahead, Vard said the outlook for new orders this year was weak.

Vard said the new order intake for FY2014 amounted to almost NOK 9.5 billion across 16 vessels, but the Q4 intake was a "below average" of NOK 503 million, reflecting an uncertain and changing market situation in the wake of the strong oil price decline.

Two vessels were delivered from yards in Norway during Q4, bringing the total number of vessels delivered throughout 2014 to 18.

At the end of 2014, the order book value amounted to NOK 17.74 billion, down from NOK 20.13 billion at the end of third quarter 2014. It comprises 39 firm vessel orders, 24 of which will be of Vard's own design..

Vard said it expects 2015 to be a challenging year for the industry and for the group:

"The recent oil price decline has profoundly altered the exploration & production spending outlook for oil companies, in particular for the North Sea, Vard's home market. Oil service companies and offshore support vessel owners have been directly impacted.

"On the back of the unfavourable short-term market situation, new order intake for 2015 is expected to be weak, although Vard's existing order book ensures good revenue coverage for the majority of the year.

Vard said a company-wide cost improvement program is in progress, and is aimed at increasing flexibility and reducing both fixed and variable costs, thereby strengthening Vard's position in a highly competitive market.

Said Roy Reite, Vard CEO and executive director: "The coming year is going to be challenging for both the industry and for VARD, and we expect new order intake for 2015 to be weak overall. Nonetheless, there continues to be demand for certain vessels, such as vessels for inspection, maintenance & repair - where VARD has expertise and a demonstrated solid track record. We are strengthening our competitiveness by cutting cost and increasing flexibility, and we will actively seek out ways to diversify our revenue stream and enhance synergies with our parent company."