| Singapore-listed Norwegian offshore vessel builder Vard will improve in its net cash position despite a gloomy order outlook, CIMB Securities analyst Yeo Zhi Bin told IHS Maritime today. “Vard’s net cash position has really tumbled; [hence] keeping cash will be the company’s first priority,” Yeo noted. “We expect Vard’s cash balance to increase in FY 2015 and FY 2016 with dividend payouts set to resume.” CIMB disclosed on Monday that while Vard has not issued dividends for FY 2014, it is expecting the shipbuilder’s financial health to improve this year and be able to maintain its long-term dividend policy payout of 30 percent. However, while Vard’s financial health is on the mend, managing its orderbook this year remains the company’s key challenge. With demand in its two main markets affected – North Sea being one of the regions worst hit by weak oil prices while Brazil is embroiled in one of its largest graft scandals and grappling with cost overruns – CIMB has cut their FY 2015 order forecast from NOK10.5 billion (USD1.37 billion) to NOK6 billion. Vard’s executive vice-president of investor relations, Holger Dilling, confirmed on 27 February in a conference call that Vard will focus on “cash conservation” this year to address the market downturn and volatility. Dilling added that a mitigating company-wide cost improvement programme is in progress, aimed at reducing both fixed and variable costs, and increasing flexibility. Addressing queries on Vard’s position with Brazil on a tax claim issue, Dilling revealed that while the case is at present residing “at the lowest level of administration”, Vard is expecting a decision in its favour at the second stage of the appeal’s process; the second-level decision is expected in 6–12 months. Vard elected not to make any cash provisions for the tax claim last year. On 5 August 2014, Brazil’s tax authorities informed Vard about a tax claim relating to the transfer pricing of goods and services delivered from the company’s Norwegian entities to Vard Niterói in FY 2010. The claim amounts to NOK200 million. Remarking on the possibility of privatisation, Yeo is of opinion that while it is logical for Vard to consider this option, volatile oil prices and Vard’s weak outlook for this year are the major stumbling blocks. “We believe that privatisation would hinge on some certainty in the oil price and some indications of green shoots of recovery, both of which are not expected in the next three months,” Yeo noted. |