Conrad Industries reports $323.7 million newbuild backlog

Conrad Industries' backlog includes two trailing suction hopper dredges for Great Lakes Dredge and Dock. The first of them, Galveston Island, is expected to be delivered this year. [Photo: GLDD]

Morgan City, La., headquartered shipbuilder Conrad Industries, Inc. (OTC Pink: CNRD) has reported its second quarter and six months ended June 30, 2023 financial results and backlog at June 30, 2023.

For the quarter ended June 30, 2023, Conrad had a net loss of $5.9 million and loss per diluted share of $1.18 compared to net loss of $3.4 million and loss per diluted share of $0.67 during the second quarter of 2022. The company had a net loss of $11.0 million and loss per diluted share of $2.18 for the six months ended June 30, 2023 compared to net loss of $3.5 million and loss per diluted share of $0.69 for the six months ended June 30, 2022.

During the first six months of 2023, Conrad added $191.0 million of backlog to its new construction segment compared to $198.8 million added to backlog during the first six months of 2022. Conrad’s backlog was $323.7 million at June 30, 2023, $244.1 million at December 31, 2022 and $245.1 million at June 30, 2022.

In its full OTC filing, Conrad Industries says that the losses in the quarter and six months were primarily due to the new construction segment.

“New construction gross losses in the second quarter of 2023 primarily resulted from loss jobs,” says the filing. “Our results were also adversely impacted by higher overhead allocations as we experienced lower overall volume compared to the second quarter of 2022. Gross losses in new construction included charges totaling $6.9 million in the second quarter of 2023 and $12.6 million for the first six months ended June 30, 2023, primarily relating to forward losses on three large, complex projects expected to be completed during the third quarter of 2023 and forward losses on the first five YRBM barges.”

STEEL PRICES

Conrad says in the filing that its results for the six month “reflect a continued challenging operating environment, including challenges associated with continued high steel prices, inflationary price increases in other materials and equipment, supply chain disruptions, a tight labor market resulting in difficulties in retaining and hiring direct labor and rising interest rates during 2022 and the first six months of 2023. In February 2022, we significantly increased our hourly labor rates. In new construction, we continue to experience a soft market particularly for energy transportation projects and projects related to the offshore oil and gas industry; however, demand in the infrastructure and government markets helped offset a portion of the adverse impact. We believe that, largely as a result of high steel prices, other inflationary cost increases and higher interest rates, many new construction customers have delayed new orders. The repair sector is showing signs of improving market conditions in the Gulf of Mexico from an uptick in activity and in the inland transportation market as operators are experiencing improved day rates. The infrastructure market also continues to be a bright spot as profitable jobs in the infrastructure market enhanced results in our repair and conversion segment and helped offset some of the adverse impact in our new construction segment. We continue to experience pricing pressure in both segments, which has intensified due to high steel prices and higher interest rates. These factors negatively impacted our results for 2022 and may continue to negatively impact our financial performance through the remainder of 2023.”

Commenting further on steel prices, the OTC filing says: “Beginning in late 2020 and throughout 2021, steel prices increased sharply, primarily due to supply issues caused by the COVID-19 pandemic. While steel prices appeared to be softening in the beginning of 2022, the Russian invasion of Ukraine beginning on February 24, 2022 drove steel prices higher, ultimately peaking in June and July of 2022. Prices began to decline in August of 2022 and appeared to stabilize in early 2023, and availability improved. In March 2023, prices began to increase, have continued to increase through April 2023, and seemed to have stabilized in June 2023. However, current price levels remain significantly higher than pre-pandemic prices. Accordingly, much uncertainty remains regarding future steel prices.”

BID ACTIVITY

“Bid activity in 2023 has been relatively strong, although uneven, inland tank barge utilization has been high, there is increased government funding available for infrastructure and military projects and pandemic concerns continue to recede; however, economic uncertainty including concerns regarding continued rising inflation and interest rates could adversely affect us,” says the Conrad filing. “We are actively exploring projects in the offshore wind industry particularly as it moves into the Gulf of Mexico. We believe some delayed customer orders will move forward if steel prices stabilize or our customers’ business opportunities or fleet replacement needs require the vessels. We are also optimistic about opportunities in our repair and conversions segment.”

BACK LOG

“During the first six months of 2023, we added $191.0 million of backlog, as compared to $198.8 million added in the first six months of 2022. Our backlog was $323.7 million at June 30, 2023, $244.1 million at December 31, 2022 and $245.1 million at June 30, 2022,” says the filing. “Our backlog as of June 30, 2023 consisted of 31 vessels: five YRBM barges, five ferries, three LPG barges, three spud barges, four 30,000 bbl tank barges, two 6,500-cubic-yard capacity trailing suction hopper dredges, two multi-cat tugs, two ice class tugs, four deck barges, one dry dock, and one towboat. As of June 30, 2023 and December 31, 2022, approximately 27.4% and 47.7%, respectively, of our backlog related to contracts for one commercial customer, most of which related to the two 6,500-cubic-yard capacity trailing suction hopper dredges for Great Lakes Dredge and Dock, with the first scheduled for delivery in the third quarter of 2023 and the second to be delivered in 2025. We expect to complete approximately 32.3% of our backlog at June 30, 2023 during the remainder of 2023. Our management team is focused on effectively executing our backlog and on obtaining additional backlog.”

• More in the full Conrad Industries filing, including its thoughts on building vessels for stock. Download it HERE