Vard Holdings: Lack of New Vessel Orders Means Strict Cuts to Come

Illustration: Vard Holdings
Illustration: Vard Holdings

Vard Holdings, the Norway-based designer and builder of offshore and specialized vessels, on Wednesday reported financial results for the first quarter ended March 31, 2015, revealing that a lack of new vessel orders will mean reduced activity and strict cost-cutting measures to come.

The company reported improved revenue of NOK 3.1 billion in the first quarter of 2015, but unrealized foreign exchange losses pushed the company to a net loss of NOK 226 million (about US$30 million) in the quarter.

Vard said that in Q1 2015, the company continued to see a high level of activity at its yards with the delivery five vessels during the quarter from the yards in Norway and Vietnam. However, Vard says that down cycle in the oil and gas industry has weighed heavily on the development of its newbuild orderbook, with zero new vessel orders secured by the group in Q1 2015.

As a result of the anticipated reduced yard activity ahead, Vard says that it will implementing a strict cost-cutting program that will include the reduction of overheads, reduced use of outsourced and subcontracted labor, and temporary and permanent reductions in the work force. Vard also announced Wednesday that it has undertaken several management changes to underscore its focus on critical areas.

Mr. Roy Reite, Chief Executive Officer and Executive Director of VARD, commented: “We expect weak order flows to be a prevalent theme in 2015. To mitigate the effects of lower yard activity, we aim to streamline the cost structure of our business over the next few months, as well as foster stronger ties with new and repeat customers to better position ourselves for new orders once the industry makes a turnaround. The changes made in our organization will strengthen VARD in taking on the challenges our industry is facing right now.”

At the end of Q1 2015, Vard’s order book value, comprising of 32 vessels, amounted to NOK 15.6 billion, representing a 28% decrease from the same quarter 2014.

Vard is a majority-owned subsidiary of Fincantieri Oil & Gas S.p.A and operates ten strategically located shipbuilding facilities, including five in Norway, two in Romania, two in Brazil and one in Vietnam.