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The shipyard group Vard Holdings has reported a net loss of NOK 27 million in the first quarter of 2017. The result was heavily affected by the problems of the Norway-based shipyards.

Revenues sank by 12% to NOK 1,777 million. »This was mainly attributable to reduced activity at [ds_preview]Vard‘s Norwegian yards, as well as the cessation of operations at Vard Niterói during 3Q 2016«, the subsidiary of Italian shipbuilding giant Fincantieri stated. An EBITDA before restructuring cost of NOK 40 million was recorded in 1Q 2017, compared to
NOK 57 million recorded in 1Q 2016. During the quarter, the Group recognized a restructuring cost of NOK 6 million, less than the NOK 11 million recorded in the same quarter of 2016. Net financial costs in 1Q 2017 were NOK 4 million, as opposed to net financial income of NOK 48 million in 1Q 2016. Consequently, Vard registered a net loss of NOK 27 million in 1Q 2017 compared to a net profit of NOK 43 million in
1Q 2016.

»Our diversification strategy continues to yield positive results, as evidenced by the orders we have received
for various specialized vessels. As we progress with modest growth in our order book, we are exploring how our expertise can be deployed to other vessel types. Whilst seeking out new project opportunities, we remain focused on ensuring that our project portfolio is sustainable, and mitigating the associated risks.«

Roy Reite, CEO and Executive Director, Vard Holdings

During 1Q 2017, VARD’s order intake was NOK 1,885 million. Four newbuilding contracts were secured, comprising two car and passenger ferries, one krill fishing vessel, and one pelagic trawler. In addition, a Letter of Intent (LoI) for one expedition cruise vessel was signed. As at 31 March 2017, the Group’s order book comprised 43 vessels, of which 36 will be of own design. This translates to an order book value amounting to NOK 13.0 billion, up from NOK 12.7 billion at the end of 2016, and NOK 8.6 billion at the end of 1Q 2016.

Low workload levels

According to the statement, over the last quarter, workload levels in Norway were still relatively low, and temporary layoffs persist at several yards. Repair, maintenance and upgrade projects are being undertaken, and a maintenance program for Norwegian Coast Guard vessels has also been initiated under an agreement signed during the quarter.

Increasing utilisation in Romania

Vard‘s Romanian yards, especially Vard Tulcea, continued to increase their utilisation levels. Hull construction for Ponant‘s four exploration cruise vessels is ongoing, whilst steel cutting has started for the two of Hapag-Lloyd Cruises’ vessels. In addition to hull construction for Vard’s own cruise vessel projects, and thirteen fully outfitted Module Carrier Vessels (MCV), the Romanian yards are building large ship sections for Vard‘s parent company, Fincantieri.

Operations in Vietnam remain stable amidst healthy yard utilization, with seven MCVs on its order book. »The yard is progressing well on the MCV projects, with the first vessel successfully launched, and undergoing commissioning«, Vard added.

In Brazil, two Pipelay Support Vessels (PLSV) for Dofcon Navegação, a joint venture of DOF and TechnipFMC, and two Liquefied Petroleum Gas (LPG) carriers for Transpetro are under construction. As these projects are progressing, the focus has turned to outfitting and commissioning. Consequently, there is insufficient workload in the early phases of vessel construction, and Vard is pursuing leads to secure additional work for the yard.

Diversification efforts

klein Research Expedition Vessel from VARD to Rosellinis Four 10 No 2
Source: Vard

The group intends to continue to reap positive results from its long-term diversification efforts. Across all shipyards, the majority of offshore projects in the order book are nearing completion, and there is a shift towards cruise vessels and other specialized vessels in all stages of production. Healthy demand is still experienced in the exploration cruise vessel segment, where an LoI for one such vessel was entered into in 1Q 2017. VARD has also strengthened its position in the fisheries and aquaculture segment with contracts recently entered into for a krill fishing vessel, a pelagic trawler, and a live fish transportation vessel.

The Group has also secured a deal to design and construct a Research
Expedition Vessel (REV) for Rosellinis Four-10, owned by Norwegian industrialist Kjell Inge Røkke and family. »Meanwhile, in the offshore sector, nascent interest for individual vessel types is noticeable, although demand still appears too sporadic to constitute a trend. Risk is still inherent in the existing portfolio of offshore projects, and the Group is continuously working to mitigate risk and strengthen its financial robustness«, the release states.