Vard Holdings Limited, a designer and shipbuilder of offshore and specialised vessels, today announced its financial results for the first quarter ended 31 March 2014 highlighting ‘exceptionally high’ order intake.
The revenues for the first quarter 2014 were NOK 2.67 billion, down 2.7% from NOK 2.75 billion in the corresponding period of 2013.
Operating profit for the first quarter was NOK 123 million, down from NOK 275 million in the corresponding period of 2013. The operating margin for the quarter, representing operating profit to total revenues, was 4.6%. The EBITDA margin, representing EBITDA to total revenues was 6.4%. For the corresponding period last year, the operating margin and EBITDA margin were 10.0% and 11.1% respectively.
Profit before tax was NOK 119 million, down from NOK 264 million in the corresponding period of 2013. With an effective tax rate of 29.0%, profit after tax came in at NOK 85 million. For the first quarter of 2013, the profit after tax was NOK 180 million.
The Group’s cash position improved with nearly NOK 400 million since the end of FY2013, and cash and cash equivalents at the end of the quarter stood at NOK 2.1 billion, mainly due to an increase in operating cash flows, coupled with the effect of lower cash flows used for investing activities.
VARD said it recorded an exceptionally high order intake of NOK 5.5 billion ($916 million) in 1Q2014, securing eight new vessel contracts and improving the Group’s visibility with a further extension of the order book. Order book value at the end of the quarter amounted to a five-year high of NOK 21.8 billion ($3.63 billion), representing a 13% increase from the full year 2013 (“FY2013”), and a 41% increase from the same quarter in the preceding year (“1Q2013”).
The order intake includes an arctic Anchor Handling Tug Supply (“AHTS”) vessel for Bourbon – the first AHTS contracted since 2012 –, an Offshore Subsea Construction Vessel (“OSCV”) for Solstad Offshore – VARD’s largest ever single vessel order –, a Diving Support and Construction Vessel for leading subsea group Technip, and three Platform Supply Vessels (“PSV”) to be built at the Group’s yard in Vietnam, two of which for new customer Mermaid Marine Australia.
During the quarter, VARD successfully delivered four vessels out of Norway and Romania, and its order book as at 31 March 2014 stood at 45, of which 27, or 60%, will be of VARD’s own design.
During the quarter, one of the delayed vessels at Vard Niterói was completed, reducing the yard’s load from its peak in the fourth quarter of the last financial year. Of the three remaining projects, one vessel has successfully concluded its sea trial and is slated for delivery in May.
Vard Promar, the Group’s second Brazil yard, is in the final stage of construction, with the installation of the gantry crane to be finalized in July 2014. The yard currently has a headcount of about 1,210 employees, and construction of its first shipbuilding projects, a series of LPG carriers, is advancing.
On the back of three new contracts secured during the quarter, Vard Vung Tau’s order book lengthened, and yard utilization improved immediately. All projects at the Vietnam yard are progressing well.
The investment program at Vard Tulcea in Romania was completed, leading to a positive development in productivity. The hull yards in Romania experienced high workload in 1Q2014, while the outfitting yards in Norway generally observed a good level of yard utilisation. The four vessels delivered in 1Q2014 all came from VARD’s Norwegian yards.
High demand expected to continue
The Group remains positive on order activity for the full year 2014, but also considers the order intake in 1Q2014 to be exceptional, the company said, adding that VARD expects to see continued strong demand from the subsea support and construction vessel segment despite concerns over the rising production cost in the oil & gas industry. Average vessel size and complexity are expected to continue to increase.
VARD believes there will be incremental growth opportunities from new business development, such as the establishment of Vard Marine, the new design and engineering subsidiary in Canada, announced on 17 March 2014, the company added.
Roy Reite, Chief Executive Officer and Executive Director of VARD, commented, “We have had a promising start to the new year, and continue to reinforce our position as a market leader, and strengthen partnerships with new and repeat customers. We are excited for the upcoming projects in 2014 and are confident of building upon our solid fundamentals to tap on future growth opportunities.”