Vard Holdings Limited, one of the major global designers and shipbuilders of offshore and specialised vessels, announced its financial results for the second quarter of financial year 2014 (“2Q2014”), and first half ended 30 June 2014 (“1H2014”).
Stable top line, resilient EBITDA margin and solid cash position
Revenues for 2Q2014 were NOK 2.94 billion, in line with the corresponding period of 2013 (“2Q2013”), and revenues for 1H2014 registered at NOK 5.61 billion. Signalling a gradual recovery in profitability, EBITDA rose for the fourth consecutive quarter to NOK 189 million. EBITDA margin (representing EBITDA to total operating revenues) for 2Q2014 stood at 6.4%, unchanged from the preceding quarter but significantly higher than EBITDA margin of 4.1% in 2Q2013. Operating profit for the quarter was NOK 140 million, and profit after tax for 1H2014 rose almost 40% year-on-year to NOK 190 million. At the end of 1H2014, VARD had cash and cash equivalents amounting to NOK 1.8 billion.
Healthy order intake of NOK 2.7 billion promotes high order book visibility
In 2Q2014, VARD recorded a healthy order intake of NOK 2.7 billion following five new vessel contract wins across all three of VARD’s major vessel segments. These five vessels include one Offshore Construction and Anchor Handling Vessel for Rem Offshore, newly developed by Vard Design, one Offshore Support Vessel for Island Offshore, a repeat customer that VARD has delivered more than 30 vessels to in the past, and three Platform Supply Vessels (“PSV”), one for Carlotta Offshore, and two for Nordic American Offshore. On the back of seven vessel deliveries, VARD concluded 1H2014 with a strong order book value of NOK 21.6 billion and 43 vessels in the order book. The existing order book stretches into 2017, and includes 27 vessels of VARD’s own design.
Stable operations in Europe and Vietnam, still challenging in Brazil
During the quarter, VARD’s yards in Europe continued to experience generally stable operations and high activity levels. In the wake of record investments in Romania, the Group now focuses on enhancing organisational efficiency to drive down costs and secure long term competitiveness. The Vietnam yard enjoyed high activity and expanding operations on the back of a series of recently secured orders which resulted in improved visibility and yard utilisation.
Operations in Brazil remain challenging. Two vessels were successfully delivered from Vard Niterói in 2Q2014, while two delayed vessels remain to be delivered from the original Niterói order book. At the same time, with the arrival of two LPG tankers undergoing outfitting only at the Niterói yard, operations are being recalibrated to reflect a changing production profile. Meanwhile, following the completion of yard construction at Vard Promar, the new Brazilian yard’s organization is growing rapidly, adding more than 500 employees to its headcount in recent months. Additional resources from Europe are being mobilized to strengthen the organization and implement productivity improvement measures, critical to reaching production targets at Vard Promar during the high- complexity ramp-up phase.
Strengthened presence in North America
In a strategic step forward to boost its presence in North America, the Group recently acquired the leading marine design and engineering company in the region, now integrated with and operating under the Vard Marine name. The acquisition allows VARD to work with existing and new clients on projects for the North American market, and strengthens its capabilities to serve customers worldwide through the sales of design and equipment packages.
Headquartered in Vancouver with branch offices in Ottawa and Houston, Vard Marine provides a broad range of naval architecture and marine engineering services worldwide. Its range of vessel types is complementary to VARD’s pre-existing product portfolio, and gives VARD a leading design market share with over 20% of the overall OSV order book in the United States.
New order intake supported by growing client base
In the midst of an industry-wide trend towards more cost-efficient assets, VARD believes demand for highly specialised Offshore Subsea Construction Vessels and subsea support vessels will be the strongest in the near-to-medium term, while North Sea OSV day rates are under pressure. The Group’s order flow is supported by a growing and more international client base, but a slowdown in new orders in the second half of 2014 is expected compared to the exceptional order intake in 1H2014. However, the existing order book ensures high visibility, good yard utilisation and stable operations in Europe and Vietnam.
Roy Reite, Chief Executive Officer and Executive Director of VARD, commented, “With the recent acquisition, we are accelerating our expansion into the important North American market. We look forward to strengthening our service offering to our existing clients, and will also work towards growing and diversifying our customer base internationally. Despite the continuing operational challenges in Brazil, I believe VARD is well-positioned to build on our strong foundations to capture new and exciting opportunities in the industry.”