November 15, 2009
Davie Yards gives "going concern" warning
Canada's Davie Yards Inc. (TSX:DAV) issued a "going concern" warning in announcing its results for the third quarter and nine-month periods ended September 30, 2009.
"The corporation's cash may not be presently sufficient to fund expected cash requirements throughout the next 12 months," cautioned Davie. "The ability of the corporation to continue as a going concern is dependent upon raising additional financing, which is related to one of the corporation's clients, Ocean Hotels Plc., finalizing financing from Export Development Canada to meet its contractual obligations towards the corporation and pay the instalments due under its construction contracts. Ocean Hotels Plc. has informed through a press release that it has signed an agreement of a $100 million loan facility with Export Development Canada, where the condition precedence needs to be fulfilled. The outcome of these matters is dependent on a number of items outside the corporation's control. As a result, there is uncertainty as to whether the corporation will have the ability to continue as a going concern."
Davie reported a net loss for the third quarter of 2009 of $6.3 million ($0.02 loss per share on a diluted basis), compared to a net income of $3.3 million ($0.03 per share on a diluted basis) for the third quarter of 2008.
For the nine-month period ended September 30, 2009, net loss was reduced by 69% to $15.8 million ($0.06 loss per share on a diluted basis), compared to a net loss of $51.5 million ($0.44 loss per share on a diluted basis) for the same period in 2008.
Davie said the net loss for the third quarter of 2009 was mainly due to foreign currency exposures, which negatively impacted results of operations by approximately $4.0 million during the quarter compared to a positive foreign currency gain of approximately $11.0 million for the same period one year ago.
Year-to-date revenues for the nine-month period ended September 30, 2009 were higher at $80.6 million compared to $51.4 million for the nine-month period ended September 30, 2008, mainly reflecting an increase in the operating activities on the three vessels currently under construction.
"Despite our net loss, we have achieved good results in the third quarter of 2009. Our company is currently unable to protect itself against currency fluctuations, which contributed to our loss for the period. We will pursue foreign currency coverage when we can put in place the appropriate banking facilities," said Steinar Kulen, President and Chief Executive Officer. "We are pleased with the operational execution of our projects, which are all within budgeted costs, excluding the impact of foreign currency fluctuations."
Total backlog was $531.4 million at the end of September 2009, compared to $567.4 million at the end of June 2009 and $606.6 million at the end of December 2008.
Davie says it "is well positioned for the new opportunities coming up."
Following the finalization of the financial restructuring, management has been strengthened and an organizational restructuring has taken place focusing on attracting competencies needed for the execution of multiple, concurrent and large projects.
"We are well underway. Production output and progress are according to plan and supporting the schedule agreed with our client Cecon ASA. We also expect to start production of the two vessels for Ocean Hotels Plc. soon, as a loan agreement with Export Development Canadahas been signed, and capacity of 1650 employees is built up for it," said Mr. Kulen.
"The foundation is strong and the future looks promising," he continued. "The Canadian Government requirement for new ships for the Navy, Transport Canada and the Coast Guard provides opportunities that our European competitors do not have, since the commercial shipbuilding markets continue to be affected by the ongoing financial crises."