Vard lays off some Norwegian staff and closes Niterói yardNews // July 21, 2016
Although it is diversifying into new markets, offshore shipbuilding specialist Vard has reported that it has had to temporarily lay off workers at its yard in Brevik, Norway, and has now closed its struggling Niterói shipyard in Brazil.
Announcing its financial results for the second quarter of 2016 and first half ended 30 June 2016, the company said diversification away from traditional markets had yielded results and noted that in the last quarter it had secured a total of 19 new shipbuilding contracts with a total new order intake of NKr 6.2 billion, making the second quarter of 2016 the best quarter in terms of order acquisition since 2013.
However, Vard registered lower revenues of NKr 2.2 billion in the second quarter, representing a 10.9 per cent decline from the same quarter of 2015. First half 2016 revenues came in at NKr 4.2 billion, down 23.6 per cent from the corresponding period in 2015. The reduced turnover was mainly due to lower activity levels at its European yards and at Vard Niterói in Brazil.
As at 30 June 2016, the group had a total orderbook amounting to NKr 11.9 billion consisting of39 vessels, of which 30, or 77 per cent, will be of Vard’s own design.
In Norway, its shipyards are experiencing varying degrees of utilisation. With several offshore projects in advanced stages of construction, and one cancellation pending, the challenge is to bridge a period of low workload while awaiting the arrival of hulls for new projects from Romania.
To this end, the entire workforce at Vard Brevik has been laid off temporarily, while the group seeks new opportunities to utilise the idle capacity. Separately, Vard Aukra is expanding its service offering in the aquaculture market, following the delivery of one fish feed barge and two live fish treatment barges.
Activity in Romania is ramping up, with yards expected to stay well utilised going forward. Nine of the 15 Module Carrier Vessels from the recent Topaz Energy and Marine contract win are expected to be built entirely in Vard Braila and Vard Tulcea. In addition, the yards are seeing an increasing amount of work arising from the sub-delivery of cruise vessel hulls to Fincantieri, along with the hulls of the four cruise vessels for Ponant, which, if confirmed, are to be constructed at Vard Tulcea.
Following a period of downsizing and restructuring at the Romanian yards last year, the focus now is to maximise operating efficiency to handle the pick-up in workload.
Robust operations continue in Vietnam with yard utilisation now secured all the way through 2017. Outfitting work for a subsea construction vessel for Farstad remains on track, with delivery slated by end-2016. Work has also commenced for the construction of the six Topaz MCVs to be built at Vard Vung Tau.
Following the delivery of an AHTS for DOF in April, and the completion of outfitting works in relation to a LPG carrier for Transpetro, Vard Niterói in Brazil has closed off all its projects during the quarter. Yard operations have since been shut down, and the leased land area has been returned to the owners in mid-July. Most of the workforce has been terminated following the yard’s closure, with some key personnel transferred to Vard Promar to further strengthen the management team there.
Looking ahead, the group’s activities in Brazil will be concentrated on Vard Promar. Work on projects there, including three more LPG carriers and two PLSVs, is progressing in line with forecasts.
The group’s overall exposure to Brazil has been reduced through the exit from Vard Niterói.
Vard said the offshore oil and gas market remains challenging, and it expects limited new contract opportunities from the sector in the near term. As several offshore players are undergoing financial restructuring, the group will continue to focus on counterparty risk by working with clients to ensure the delivery of its current orderbook.
Vard continues to explore non-traditional markets as part of its diversification strategy, leveraging on its existing capabilities and relationships to grow its business.
Roy Reite, Chief Executive Officer and Executive Director of Vard, said: "While the offshore market goes through an unprecedented phase of consolidation and restructuring, we remain committed to expanding its client base in new market segments, tapping opportunities for growth. With a long shipbuilding history and experience in building highly-specialised vessels, we look forward to deepening relationships with our new customers, growing the breadth of our offerings and restoring value for our shareholders.”