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Highlights on Vard Holdings’ Latest Precipitous Fall in Profits

Vard Holdings (SGX: MS7), a ship and offshore vessel builder, is one of only two companies based in Norway that is listed here in Singapore. Currently, Vard operates in 10 shipyards around the world with 5 facilities in Norway, 2 in Romania, 2 in Brazil and 1 in Vietnam. Vard is majority owned by Fincantieri S.p.A. Group (with a  55.63% stake), one of the largest shipbuilders in Europe. Vard announced its first quarter results on 29 April 2014.

Operating results

For the quarter, revenue was just 2.7% lower at NOK2.67 billion compared to year ago. However due to a much higher increase in operational and administrative costs, its operating profit was some 55.3% lower at NOK123 million. In terms of earnings per share, the company was only able to record a quarterly EPS of 1.61 Singapore cents compared to 3.39 Singapore cents last year.

Nonetheless, the total assets within the company had managed to increase to NOK14.89 billion from NOK13.67 billion just three months ago. This is mainly due to an increase in its cash holdings and the value of vessels that are still being built. Vard ended the quarter with a net asset value per share of S$0.67, a 3% improvement from the last quarter.

Going forward

Vard’s management is optimistic about the company’s prospects. Vard currently has an order book value of NOK21.8 billion, which is 12.6% higher than the last quarter. The group was able to add another 8 vessels to its order book in the first quarter of 2014, bringing the total number of vessels in its order book to 45. The order book represents future revenue for Vard and any increase in it would mean that the company’s seeing growth in its business.

Furthermore, Vard Promar – the yard that’s undergoing construction in Brazil –  is now in its final stages and it is expected to be ready in July 2014. At present, the yard is already starting to build vessels with 1,210 staff busy at work there. It would be well worth to keep an eye out on the progress of Vard’s Brazilian shipyards given that it is “key” to the company’s performance in the short to medium term, according to management.

Elsewhere, Vard also “believes there will be incremental growth opportunities from new business development, such as the establishment of Vard Marine, the new design and engineering subsidiary in Canada”.

Foolish Summary

Vard Holdings closed on Tuesday at a price of S$0.955. That would translate to an annualised price to earnings ratio of 14.8 and a price to book ratio of 1.4.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Stanley Lim doesn’t own shares in any companies mentioned.