Singapore-listed Norwegian offshore support vessel builder VARD Holdings posted a NOK51 million (USD6.2 million) loss for the second quarter of 2015.
The result reversed a NOK105 million profit for the same period in 2014.
The loss was due to severance payments as VARD restructured its business in cut jobs, as well as a shortfall in new orders and lower deliveries.
VARD, led by CEO Roy Reite, incurred restructuring costs of NOK14 million in the second quarter of 2015 as it had to compensate workers who were made redundant. That was NOK8 million more than in the first quarter of 2015.
The drop in oil prices precipitated a drought in new orders and activity at VARD’s yards in Norway and Romania has slowed as a result.
These yards delivered two vessels in the second quarter of 2015, four less than in the first quarter.
Performance in VARD’s yards in Brazil continues to be lacklustre. The yards, built to satisfy local content requirements, have been experiencing a manpower crunch and high staff attrition.
Related news: Vard buys IT company
Operations at the yard in Vietnam are stable and yard utilisation is still good. The yard delivered one vessel in the second quarter of 2015 and two vessels in the first half of 2015. The construction work for the two vessels with contracts terminated in the first quarter of 2015 continues according to plan.
In Brazil, progress on the LPG carriers at the Vard Promar yard has been slow and the estimated completion dates have been postponed. As a consequence of the delays, additional loss provisions have been required. The pipe-laying support vessels on order are still in progress.
Downsizing at the Niteroi yard continues in line with the declining orderbook following recent vessel deliveries.
After the delivery of the first LPG carrier on 9 July, the yard has one anchor handling tug supply vessel in its orderbook, and outfitting work on the second LPG carrier of the Vard Promar orderbook.
Niteroi’s earnings have been affected by cost overruns related to the last AHTS.
Interest expenses was NOK17 million in the second quarter of 2015, up from NOK15 million in the first quarter of 2015 as a result of increased borrowings, and reduced capitalisation of borrowing cost related to assets under construction.
VARD had a net foreign exchange loss of NOK202 million in the first half of 2015, of which NOK142 million is unrealised. Of the unrealised foreign exchange loss, NOK132 million is related to the yard construction loan in Vard Promar.
Formerly known as STX OSV, the company was renamed VARD after being sold to Italian cruise ship builder Fincantieri in 2013.
The company has plans to further trim its headcount, especially in the underperforming shipyards.
Engineers and skilled workers from Romania and Norway have been engaged to support Vard Promar in Brazil, and additional engineering resources are being subcontracted to the Fincantieri parent group. Adjusting capacity flexibly in line with the new order development is one of the key challenges in this situation, as utilisation is volatile and varies from yard to yard.
To gear up for an eventual recovery in oil prices, VARD will continue with research and development.