Vard books more orders, loses less

MARCH 1, 2017 — Fincantieri's 69.67%-owned Vard subsidiary has reported fourth quarter and year end results for 2016. Among the highlights: a full year new order intake of NOK 10.6 billion (about $1.6 billion), beating each of thetwo previous years.

Restructuring costs of NOK 29 million and NOK 105 million were recognized during the quarter and full year. Consequently, Vard registered a net loss of NOK 69 million in 4Q 2016 and NOK 197 million in FY 2016, compared to a loss of NOK 170 million in 4Q 2015 and NOK 1.3 billion in FY 2015.

As at December 31, 2016, Vard had an order book of 41 vessels, of which 35, or 85%, will be of its own design.

Vard says that its Romania and Vietnam shipyards operating at full load, while utilization is still challenging in Norway

Activity at Vard's Norwegian shipyards remains soft, following the delivery of two large OSCVs in 4Q 2016, and another one in early January. Temporary layoffs are used to mitigate the effects of varying capacity utilization until arrival of the first cruise vessel hulls in Norway, while the yards are taking on repair, conversion and upgrading works in the interim. A key contract for two ferries was secured for Vard Brevik, ensuring continued operations at the yard. In contrast, the Group is seeing generally high workload in engineering and procurement for the new projects in the cruise segment. Here, a fruitful cooperation with Fincantieri has been established.

In Romania, Vard says its shipyards are enjoying robust activity with utilization secured through 2018. The construction of 13 out of 20 Modular Carrier Vessels ("MCVs") for Topaz Energy and Marine at Vard Braila and Vard Tulcea is progressing according to plan. The expansion of facilities at Vard Tulcea is also on schedule, with the extension of a launching barge to accommodate vessels up to 210 x 49 meters newly completed, and preparations for the installation of a new gantry crane well underway.

Faced with a rising workload, management focus has turned to ramping up capacity and building the skills and resource base to support Vard's diversification effort also operationally.

Operations in Vietnam remain stable amid good yard utilization, with work on the seven MCVs under construction at the yard in Vung Tau progressing according to plan. The yard continues to work closely with Vard Tulcea and Vard Braila in sharing best practices and through joint management of this project. The OSCV built for Farstad at the yard has been transferred to Norway for installation of an offshore crane, with delivery of the vessel now imminent.

Vard says operations In Brazil, though the operating landscape remains challenging.

Following the decision to focus all Brazilian shipbuilding activities at Vard Promar, Vard completed a major rightsizing process during the quarter. Total headcount for the Brazilian operations has been trimmed to about 1,500.

Roy Reite, Chief Executive Officer and Executive Director of Vard, commented, "We are grateful for the success we have seen in our diversification efforts, but we do not take our achievements for granted. In 2017, we remain sharply focused on laying the path for new business development to keep activities at our yards stable. We are fine-tuning our organizational structure to support our new business aspirations, with the objective of maintaining Vard's strong position as a provider of innovative, customized solutions to the global maritime industry."



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