Vard Down on Forex, Aims to Streamline Cost Structure

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Shipbuilder and designer of offshore and specialised vessels, Vard Holdings has seen its profits slip into the red on unrealized foreign exchange losses, despite increase in turnover.

Vard generated revenues of NOK 3.06 billion for the first quarter of 2015, up from NOK 2.67 billion in the corresponding period of 2014. The increase in revenues is caused by higher activity at the yards and with subcontractors.

Vard’s operating profit for the first quarter was NOK 9 million, down from NOK 123 million in the corresponding period of 2014. EBITDA before restructuring cost was NOK 65 million compared to NOK 171 million in the corresponding quarter last year. Restructuring cost of NOK 6 million mainly relates to statutory termination benefits to redundant staff at the yard in Niterói.

The EBITDA margin was reduced from 6.4% in the first quarter of 2014 to 2.1% in the first quarter of 2015. The reduced margin is caused by weaker than expected performance at some of the yards.

The group posted net loss of NOK 226 million in the quarter, compared to profit of NOK 85 million for the year-ago quarter.

The Singapore-listed company booked a net foreign exchange loss in the period of NOK 207 million, of which NOK 174 million are unrealized and NOK 33 million are realized. NOK 171 million of the unrealized losses relate to the yard construction loan at Vard Promar denominated in USD with a 15 years maturity. The loan is denominated in USD to reflect USD revenue streams from contracts in Brazil, while the functional currency is BRL.

Furthermore, Vard has informed that no new vessel orders were secured by the group in the quarter. Order book value (comprising of 32 vessels) at the end of the Q1 2015 amounted to NOK 15.6 billion, representing a 28% decrease from the Q1 2014. The order book comprises 32 vessels, of which 18 will be of VARD’s own design.

Reorganisation

To underscore its focus on critical areas, VARD has also announced organizational changes and a reshuffle of the executive management team. Geir Ingebrigtsen, previously group chief controller and deputy CFO, will assume the role of acting chief financial officer in place of Jan Ivar Nielsen, who has been appointed finance officer for Brazil to strengthen the organization there in a critical phase. Other changes include the strengthening of the management structure in the areas of corporate development, and an increased focus on further developing Vard’s Equipment and Systems business as well as new business development in the Asia Pacific region.

Roy Reite, Chief Executive Officer and Executive Director of VARD, commented: “We expect weak order flows to be a prevalent theme in 2015. To mitigate the effects of lower yard activity, we aim to streamline the cost structure of our business over the next few months, as well as foster stronger ties with new and repeat customers to better position ourselves for new orders once the industry makes a turnaround. The changes made in our organization will strengthen VARD in taking on the challenges our industry is facing right now.”

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