STX OSV set for recovery in demand in large AHTS market

reite royFEBRUARY 26, 2013 — Roy Reite, CEO and Executive Director of STX OSV, says the group is "well-suited to serve the thriving subsea construction vessel market, for which we are still seeing a healthy level of project enquiries, and to benefit from a recovery in the large and ultra-large AHTS segments."

Singapore listed, Norwegian headquartered STX OSV today announced its results for the fourth quarter and full year ended December 31, 2012. It reported a profit before tax of NOK 190 million in the fourth quarter compared with NOK 828 million in the prior year equivalent quarter and a pretax profit of NOK 1,323 million, compared with NOK 2,213 million in 2012

The group is now 50.75 percent owned by Fincantieri, which is now set to make an unconditional cash offer for the remaining shares.

The group says that its full-year EBITDA margin (EBITDA to total revenue) adjusted downward from an exceptionally high base of 19 percent in FY 2011 to a still healthy 13.2 percent despite challenging conditions in particular in the fourth quarter. The company's cash position remained strong, with cash and cash equivalents of NOK 2,437 million as at December 31, 2012, even after taking into account a total dividend payout of 23 Singapore cents per share during the year, as well as increased investments in plant, property and equipment in Romania and for the construction of the new shipyard in Brazil.

Throughout the year, STX OSV witnessed generally stable operations, in particular in Norway, Romania and Vietnam. In the fourth quarter, Norway experienced temporarily lower utilization at some yards. The shipyards in Romania continue to run at high load, and investments in automation and process and efficiency improvements are being implemented with good results. In the Vietnam shipyard, project execution was excellent throughout the year, but low activity levels were recorded for 4Q 2012. Operations at the shipyard in Niterói continue to affect group performance. High attention is being devoted to mitigating the effects of high workload and too high staff turnover, and various measures have been taken to secure delivery of the order book in Niterói.

With most major construction works now in place, the Group's new yard project in Brazil, STX OSV Promar, is entering a new phase, moving from shipyard construction to establishing a well-rounded shipbuilding organization. Recruitment is ongoing, and shipbuilding activities are scheduled to begin in summer of 2013, in line with previous estimates.

Following record new order intake in the first half of 2012, order conversion slowed down towards the end of the year, with just two new vessel contracts secured during 4Q 2012, accounting for order intake of NOK 1,272 million. Notwithstanding 4Q 2012 orders falling short of expectations, the value of new orders for the quarter was higher than in the preceding quarter when three vessels were contracted.

Average value per vessel in the order book increased during the year as a result of larger and more complex projects secured, with 16 vessels contracted during the year for a total of NOK 9,501 million.

With 22 vessels delivered during FY2012, at the end of the year STX OSV's total order book stood at 48 vessels, and outstanding order book value was NOK 15,096 million as at 31 December 2012. More than half, or 27 of these vessels in the order book, will be of STX OSV's own design.

Since the end of 4Q 2012, STX OSV has secured three new contracts for offshore subsea construction vessels ("OSCV") from repeat customers DOF Subsea, Farstad Shipping and Solstad Offshore, and delivered four more vessels.

Outlook: Demand for OSCVs remains robust amidst early signs of improving demand for large and ultra-large AHTS

Though new order intake varies from quarter to quarter, the market for subsea support and construction vessels remained fundamentally robust throughout FY 2012, and continues to be so, as evidenced by the three OSCVs contracted so far within the first quarter of 2013. Based on early signs in the market, demand for large and ultra-large AHTS could pick up during 2013. In contrast, the outlook for high-end PSVs continues to be subdued. Outside its core offshore support vessel segments, STX OSV sees selected opportunities within the specialized vessels segment.

Mr Roy Reite, Chief Executive Officer and Executive Director of STX OSV, said, "We believe we are well-suited to serve the thriving subsea construction vessel market, for which we are still seeing a healthy level of project enquiries, and to benefit from a recovery in the large and ultra-large AHTS segments. STX OSV remains confident in our fundamental ability to take advantage of the robust longterm demand for larger, more complex and customized projects, with opportunities arising from investments in R&D and new technology."

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