More red ink at Vard, but order backlog edges upward

Specialist shipbuilder and designer Vard Holdings Limited, which is now 78.20% owned by Fincantieri, has reported its financial results for the second quarter and first half-year ended June 30, 2017.

"Vard's business transition continues to progress amidst challenging market conditions," says Roy Reite, Chief Executive Officer and Executive Director of Vard. "Vard has adopted a two-pronged approach in sustaining its efficiency by fostering and exploring new opportunities in diverse markets, whilst internally working towards stabilizing workloads across the different shipyards. With long-standing experience in the design and construction of highly specialized vessels, Vard is well placed to tap on unrealized opportunities in various new market segment."

Vard registered a second quarter revenue of NOK 2.13 billion in 2Q,, largely unchanged from the previous corresponding quarter and up 20% from the preceding quarter.

However, after taking restructuring and other costs and incurring foreign exchange losses, Vard recorded losses of NOK 69 million and NOK 96 million for 2Q 2017 and 1H 2017 respectively, compared to losses of NOK 67 million and NOK 24 million incurred in 2Q 2016 and 1H 2016 respectively.

Vard's order intake was NOK 1.60 billion in 2Q 2017, with two new contracts secured for the design and construction of a Research Expedition Vessel (REV) and a live fish transportation vessel. As at June 30, 2017, Vard had 44 vessels in its order book, of which 37, or 84%, will be of its own designs. Vard's order book value as at June 2017 stood at NOK 12.88 billion, slightly above the December 31, 2016 order book value of NOK 12.65 billion.

Vard says that, though shipyard utilization in Norway remains low and variable, it is gearing towards mobilizing resources and strengthening its cooperation with Fincantieri in certain areas of expertise.

Vard Søviknes and Vard Langsten are advancing preparations for the first cruise vessel projects, and the design and procurement phases for these projects are either completed or progressing in a timely manner.

Vard Brattvaag was designated as the outfitting yard for two major projects contracted in 1H 2017 – the krill fishing vessel for Aker BioMarine and the REV for Rosellinis Four-10.

Solidifying its foothold in the aquaculture market, Vard Aukra has received its first contract for a live fish transportation vessel. Vard Brevik continues to pursue new business opportunities, several of which are related to LNG technology.

During the quarter, Vard's two Romanian shipyards experienced very high workloads, on the back of ongoing work for the cruise projects for Ponant and Hapag-Lloyd Cruises, and the module carrier vessel (MCV) projects for Topaz Energy and Marine, and Kazmortransflot. Work on two cruise vessel sections for Fincantieri is scheduled to be completed in the third and fourth quarter of 2017, and the construction of two more sections is expected to commence in the second half of the year.

Following the latest installation and testing of a new gantry crane at Vard Tulcea, Vard is close to completing a phase of investments at the yard, thereby growing its throughput and capabilities.

Operations at Vard Vung Tau in Vietnam remain stable, amidst healthy progress on the MCV projects, with the first MCV completed during 2Q 2017, and successfully delivered since.

Having acquired the remaining 4.85% of shares in Vard Promar, the Group now holds full control of its operations in Brazil. The shipyard is progressing on four projects under construction, with the fifth LPG tanker for Transpetro in the final phase of testing and commissioning, in preparation of delivery in 3Q 2017.

Vard says its Equipment and Solutions businesses achieved several significant milestones in 2Q 2017.

Vard Electro's new bridge solution, SeaQ Bridge, was installed and successfully tested on a vessel for the first time. Vard Electro also secured a contract for the installation of battery packages for five hybrid gas-electric ferries for Torghatten Nord, two of which will be built by Vard. In addition, Vard Electro will provide the SeaQ energy storage system for the hybridization of a Solstad Farstad-owned PSV delivered by Vard in 2014.

Vard's subsidiary Seaonics was selected to provide a comprehensive research equipment package for the REV contracted during 2Q 2017.

Although a Letter of Intent for an exploration cruise vessel signed in January 2017 expired without resulting in a firm contract, Vard says still sees unrealized opportunities in this segment and says that the fisheries and aquaculture markets also continue to see high activity, despite strong competition.

With a high utilization rate in Romania, low and variable workload in Norway, and in view of a decreasing workload in Brazil, Vard says it "continues to seek new opportunities to utilize its innovation power and global shipbuilding capacities."