Vard (formerly: STX OSV)

[Clement]

Hi Loner,

The margins were probably caused by optimistic assumptions about the subcontracting and basic materials markets in Brazil during the tender pricing process. Given that some of the legacy orderbook vessels will be delivered soon, i think the impact of the Niteroi yard will be less impactful in future quarters. The profit guidance also stated that the reduction in margins is partly related to revisions of start-up cost estimates for the Promar yard which might be a one off.

Vard has just announced that they will be hosting an earnings call next thursday, we can get ourselves into the earnings call to get more detailed information.

Haha, ya im just thinking that the impact from Brazil is small coz its a small portion of the entire business (2/24 ships), and was never expected to contribute meaningfully in the near term. Brazil contributed to 12% of total revenue in 2012 and 16% in 2011 though, strangely. Granted that they made a too optimistic estimate of their profit margin when entering into the projects, a 50% loss for a single project (which means probably overestimation by 60%) seems a little too much. just a thought.

Yep, thats why i think should wait for next week's earnings to get a clearer picture before deciding on the best course of action.

Hi, I think the 50% losses, while sounding outlandish might be possible especially with provisions for late delivery penalties etc. Look at what the sand ban did to the costs of our IRs. Even if that were the case, I think Vard can learn from this setback and put it behind them, and therefore view the current price as low as the market seems to have unreasonably extrapolated their problems into the future.