Vard: Less red ink, more shipbuilding orders

NOVEMBER 10, 2016 — Fincantieri's 55.3% owned subsidiary Vard Holdings Limited has reported its financial results for the third quarter and nine months ended September 30, 2016.

The company registered a net loss of NOK 104 million in for the quarter and NOK 128 million for the nine months, compared to a loss of NOK 845 million in 3Q 2015 and NOK 1.1 billion in 9M 2015.

Vard says that its diversification strategy continues to yield promising results, with the group gaining a total of seven new contracts during the quarter, and confirming its or four ice-class expedition cruise vessels for French cruise company Ponant.

New order intake amounted to NOK 3.3 billion in the past quarter, bringing the figure to NOK 10.2 billion for the first nine months of the year – exceeding total new order intakes for each of the prior two financial years.

Vard reported lower turnover of NOK 1.5 billion in 3Q 2016, a 34% decline from 3Q 2015, with revenues for the nine month period coming in at NOK 5.7 billion, down 27% from the previous corresponding period ("9M 2015").

Vard says the lower topline is mainly due to reduced workload at the European yards and the close-down of Vard Niterói in Brazil, where it has ceased all shipbuilding activities.

EBITDA margins improved to 2.2% in 3Q 2016 and 1.8% in 9M 2016, as compared to negative margins the year before. Restructuring costs of NOK 27 million and NOK 76 million were recognized during the quarter and for the nine-month period respectively.
will be of Vard's own design.

In Norway, shipyard activity remains relatively low as several large offshore subsea construction vessel ("OSCV") orders have either been delivered, or are in their final stages of outfitting, and cruise vessel hulls will not arrive for outfitting in Norway before the second half of 2017.

To utilize excess capacity, the Norwegian shipyards have also turned to repair, conversion and upgrading work. Temporary layoffs have been undertaken to buffer the effects of low and volatile yard utilization.

The Romanian yards however are seeing an upswing in workload, with 13 of the 20 MCVs for Topaz to be built entirely at Vard Braila and Vard Tulcea. The yards are also seeing a greater amount of work from the sub-delivery of cruise vessel hull sections to Fincantieri. Hulls for Vard's own cruise vessel projects will be built at Vard Tulcea.

Significant investments in increased capacity and capabilities are under way in Tulcea to support the implementation of the new business plan. With a sharp pick-up in activity, both Vard Braila and Vard Tulcea are hiring again, following a period of downsizing and restructuring last year.

Vietnam continues to enjoy stable operations, with full yard utilization secured till the end of 2017. Work has commenced for the construction of the seven Topaz MCVs to be built at Vard Vung Tau. The yard is actively collaborating with the Romanian shipyards in sharing best practices and through joint project management in relation to the construction of the purpose-built MCVs.

Following the recent closure of Vard Niterói, Vard is now concentrating all its Brazilian shipbuilding activities on Vard Promar. In August, the Group increased its ownership stake in Vard Promar to 95.15%. This provides for a more balanced financial structure and increases the Group's strategic flexibility in Brazil. Meanwhile, work at the yard in relation to the remaining two Liquefied Petroleum Gas ("LPG") carriers for Transpetro and two pipe-lay support vessels ("PLSVs") for DOF and Technip is in progress. A major rightsizing process is ongoing at Vard Promar, with a strong focus on cost reduction and organizational development.

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