Vard

Vard: Vard released a dismal set of 3Q14 results following its recent profit warning, with net loss of NOK37m (3Q13: NOK76m), dragged mainly by substantial cost overruns for some projects. Revenue improved 18.5% y/y to NOK2.81b, from the delivery of five vessels and two newbuild contracts. The cost overruns for some projects resulted from: i) Introduction of new production methodologies, following the comprehensive change program underway in the European organization; ii) Slower-than-expected rate of completion for several hulls at its Romanian yard, which resulted in delays and higher costs in Norway, which handles the vessels' final outfitting works. This brought 9M14 earnings to NOK195m (-20.1%) and revenue to NOK8.42b (+4.5%), which only made up 55% and 76%, respectively, of street's FY14 estimates. Vard made no provisions with regards to its Brazil tax claim (~NOK200m), as management is of the view that the Brazilian tax authorities’ assessment leading to the claim is incorrect and unlawful, and is confident that its tax filings will prevail in the appeals process. Order book lowered from NOK21.61b to NOK20.13b, providing visibility stretching into 2017. Going forward, management guided that new order intake is expected to be below average for the remainder of 2014 and 2015, given the declining oil price and expectations of lower E&P spending by oil majors.