Philly Shipyard: NSMV training ships will be a loss maker

[Image: MARAD]

No doubt about it, the contract to build the National Security Multi-Mission Vessel (NSMV) training ships was a life-saver for Philly Shipyard when it was awarded in April 2020. At that time, the shipyard’s newbuild order book was empty. Today, things are very different.

According to its just released results for the third quarter and first nine months of 2023, at September 30, 2023, Philly Shipyard had an order backlog of $1,793.7 million, with eight ships on its order book: four NSMV training ships, one subsea rock installation vessel (SRIV) and three containerships (CVs) The yard says the current order book provides it with pipeline visibility and stability into 2027.

However, the yard has been challenged by continuing COVID-driven labor shortages and pandemic related supply chain disruptions. It says these have slowed progress on the NSMVs. “Notwithstanding ongoing mitigation efforts, these factors are contributing to schedule impacts, productivity loss and increased costs,” says the earnings report.

For the third quarter and first nine months 2023 the company reports a net loss of $17.2 million and $49.1 million, respectively, compared to a net loss of $10.0 million and $3.4 million in the same periods in 2022.

“EBITDA for Q3 2022 was driven primarily by increased costs on NSMVs 1-2 and SG&A costs, partially offset by the gross profit recognized on NSMVs 3-4,” says the earnings report. “The unforeseen cost increases in Q3 2023 are mainly related to increased labor costs, turnkey costs, and overhead costs driven by the ongoing lack of skilled workers, resulting in schedule delays and compression.”

Philly Shipyard says that the lessons learned and experience gained from construction of NSMV 1 is expected to result in improved performance on subsequent vessels in the NSMV training ship series. However, it says that it continues to forecast the five-ship NSMV training ship series to be a loss-making contract.

Going forward, the report says that Philly Shipyard “continues to pursue prospects in the government and commercial newbuild markets and is presently targeting shipbuilding programs with building slots following the third container vessel.

“In the government sector, Philly Shipyard remains focused on opportunities for commercial-like and auxiliary ships. In the commercial sector, Philly Shipyard is exploring a variety of potential new construction projects for U.S.-built vessels. Philly Shipyard continues to promote variants based on existing ship designs as potential cost-effective solutions for both government and commercial customers.

“Additionally, Philly Shipyard continues to seek opportunities to replicate the NSMV contract model for other government shipbuilding programs. This innovative approach enables Philly Shipyard to apply commercial best practices for design and construction to government vessels. There is growing interest in Congress in the NSMV contract model and its potential applicability to government shipbuilding programs to reduce costs, accelerate delivery times, and build more vessels.”

• There’s much more in the full report. Download it HERE