Morgan City, La., headquartered shipbuilder Conrad Industries, Inc. (OTC Pink: CNRD) has reported its first quarter 2022 results.
The company had a net loss of $116,000 im the quarter compared to net income of $705,000 in the first quarter of 2021, when net income included $2.9 million in other income related to the Employee Retention Credit.
Conrad’s backlog was $136.5 million at March 31, 2022 compared to $148.5 million at December 31, 2021 and $193.4 million at March 31, 2021.
HIGH STEEL PRICES AND TIGHT LABOR SUPPLY
In its full filing on www.otcmarkets.com, Conrad notes that its results for the first quarter of 2022 reflect “a continued challenging operating environment, including challenges associated with the COVID-19 pandemic, continued high steel prices, inflationary price increases in other materials and equipment, supply chain disruptions and a tight labor market resulting in difficulties in retaining and hiring direct labor.
“In response, 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 the pandemic and rising steel prices, many new construction customers have delayed new orders. The repair market also continues to be adversely affected by depressed Gulf of Mexico activity and uncertainty in the marketplace; however, profitable jobs in the infrastructure market enhanced our results in our repair and conversion segment and helped offset some of the adverse impact. We continue to experience pricing pressure in both segments, which has intensified due to the pandemic and high steel prices. These factors negatively impacted our results for 2021 and may continue to negatively impact our financial performance throughout 2022.
“In late 2020 and throughout 2021, steel prices increased sharply, primarily due to supply issues caused by 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. Accordingly, much uncertainty exists regarding future steel availability and prices due to supply issues caused by the COVID-19 pandemic, relatively low inventory levels, and the war in Ukraine.”
POSITIONED FOR OPPORTUNITIES
Conrad says it believes it is well-positioned to take advantage of opportunities when market fundamentals improve. We believe customers have delayed orders due to high steel prices and pandemic uncertainties, and that some of these orders will move forward when steel prices decline or our customers’ business opportunities or fleet replacement needs require the vessels.
“We have seen a continued strong market for dredging and other infrastructure-related vessels, which we expect may continue, supported by the Infrastructure Investment and Jobs Act enacted in 2021,” says the company. “We are also exploring projects in the offshore wind industry particularly as it moves into the Gulf of Mexico. We are also optimistic about opportunities in our repair and conversions segment.”
The company notes that In March 2022 it was it was awarded a contract by the U.S. Navy for the design and construction of a Yard, Repair, Berthing and Messing (“YRBM”) barge, with options for an additional seven barges.
The fixed-price contract, a small business set-aside, has a potential value of over $140 million if all options are exercised by the U.S. Navy, Conrad says that it expects to deliver the first YRBM barge to the U.S. Navy in late 2023.
If the Navy exercises all options for the additional barges, peak production is expected to occur from 2023 through 2025.