Philly Shipyard Navigates Challenges Amid Shipbuilding Milestones

Philly Shipyard ASA (Oslo: PHLY) has announced a net loss of $17.2 million for the third quarter of 2023, bringing its 2023 losses to more than $49 million.

The loss comes as Philly Shipyard successfully delivered the first National Security Multi-Mission Vessel (NSMV 1), named the Empire State, to the U.S. Department of Transportation’s Maritime Administration (MARAD) in September. This marked an important milestone as it was Philly Shipyard’s first government newbuild delivery and the first government ship built using the Vessel Construction Manager (VCM) contract model.

Philly Shipyard is currently actively involved in a range of production activities. Empire State is the first of five NSMVs on order that will serve as training ships for state maritime academies and support humanitarian assistance and disaster relief missions.

NSMV 2 is undergoing outfitting in the outfitting dock, while NSMV 3 is well underway with over half of the blocks in the building dock and the remaining blocks in the fabrication and paint shops. NSMV 4 is in the production phase in the fabrication shops. Pre-production activities for NSMV 5 are progressing, with production scheduled to commence in the fourth quarter of 2023.

Philly Shipyard marked another significant milestone in August with the steel cutting ceremony for the Subsea Rock Installation Vessel (SRIV), the Acadia, for Great Lakes Dredge and Dock. The event was attended by President Biden.

Meanwhile, pre-production activities for Matson’s 3,600 TEU Aloha Class LNG-fueled containerships are progressing, and long lead equipment is being ordered for these ships. Matson returned to Philly Shipyard in November with a follow-on order for three additional Aloha ships for a total cost of $1 billion. The first vessel is scheduled for delivery in the fourth quarter of 2026, with subsequent deliveries in 2027. As of September 30, Philly Shipyard says it has secured firm commitments for approximately 30% of the total budgeted third-party material costs for the ships.

While Philly Shipyard has a strong order backlog of $1.793.7 billion as of September 30, labor shortages and supply chain disruptions caused by the pandemic have led to schedule impacts, productivity loss, and increased costs.

Philly Shipyard is implementing a continuous improvements based on lessons learned from the construction of NSMV 1. However, the company anticipates that the five-ship NSMV series will be a loss-making contract, despite improved performance on subsequent vessels.

While Philly Shipyard has a solid order backlog until 2027, it faces risks if it cannot secure new orders or financing for future shipbuilding programs. To mitigate this, Philly Shipyard is actively pursuing new business opportunities in government and commercial newbuild markets, targeting shipbuilding programs and exploring opportunities in the government sector. They also aim to replicate the successful NSMV contract model for other government shipbuilding programs.

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