Vard (formerly: STX OSV)

[Clement]

Looking at the annual report, a few things strike me.

1)Results are impacted by goodwill impairment of 77m and extra provision for future contract losses of 567m. (New provision of 1004m - writeback of 97m - provisions used in the year of 340m)

2)Removing these effects, Profit attributable to shareholders will be 357 + 77 + 567*(1-0.34) or NOK808m or roughly 14 sg cents per share, assuming impairment is non tax-deductible and adjusting the provision by the Brazilian tax rate of 34%.

3)With contract loss provisions currently at 924m ~ 2.6x the amount provided in 2012 and ~2.7x the amount used in 2013, i don't think the impact of Niteroi on the FS will be significant going forward.

Seems like the expectation of EPS doubling is not that far fetched.

[valuebuddies]

We wont know, investors have been expecting a turnaround for the Niteroi yard but provisions keep rising every quarter, and management's decision to hold back dividend payout causes me to believe that the future remains uncertain.

(divested)

[greengiraffe]

Vard draws $1b worth of ship orders in Q1
Published on Apr 30, 2014 1:15 AM



GLOBAL shipbuilder Vard Holdings accepted orders worth a whopping 5.5 billion Norwegian kroner (S$1.15 billion) for the first quarter, it said in a statement released yesterday.

This is up from the 2.2 billion kroner worth of new orders it racked up in the fourth quarter of last year.

The firm secured eight new vessel contracts for the three months to March 31 and successfully delivered four vessels out of its shipyards in Norway in that same period.

Vard also completed one out of its four delayed vessels at Vard Niteroi, its yard in Brazil.

Its order book value for the first quarter rose to a five-year high of 21.8 billion Norwegian kroner, a 41 per cent jump from the same period last year.

However, its net profit for the quarter fell to 92 million kroner, a 51 per cent decrease year on year.

Vard posted revenue of 2.7 billion kroner for this quarter, a 2.7 per cent dip from the same period last year.

Vard said it has a positive outlook on order activity for 2014 and it expects to see continued strong demand from the subsea support and construction vessel segment despite rising production costs in the oil and gas industry.

It also believed there will be "incremental growth opportunities" from business development, such as through the establishment of Vard's new design and engineering subsidiary in Canada, which was announced last month.

Chief executive Roy Reite said: "We have had a promising start to the new year and continue to reinforce our position as a market leader... (by) building upon our solid fundmentals.

"We have a very strong team in the company and we are confident Vard Holdings will continue to do well in the future."

Earnings per share for the quarter was 1.61 cents, down from 3.39 cents a year ago.

Net asset value per share was 67 cents as at March 31, up from 65 cents as at Dec 31, last year.

Vard shares closed 3.5 cents lower at 95.5 cents yesterday.

IVAN TEO

[ahyu02]

The delayed vessel (PRO 30) is delivered in April, that is why if you look at the presentation slide, 1Q deliveries from Brazil is 0.

(divested)

[GPD]

Looking at the annual report, a few things strike me.

1)Results are impacted by goodwill impairment of 77m and extra provision for future contract losses of 567m. (New provision of 1004m - writeback of 97m - provisions used in the year of 340m)

2)Removing these effects, Profit attributable to shareholders will be 357 + 77 + 567*(1-0.34) or NOK808m or roughly 14 sg cents per share, assuming impairment is non tax-deductible and adjusting the provision by the Brazilian tax rate of 34%.

3)With contract loss provisions currently at 924m ~ 2.6x the amount provided in 2012 and ~2.7x the amount used in 2013, i don't think the impact of Niteroi on the FS will be significant going forward.

Seems like the expectation of EPS doubling is not that far fetched.

Taking into acct what Clement said, the PE is 7.4x for FY13. This probably gives a truer picture of VARD unedrlying performance. Going ahead, they shouldn't need to add more provision but may still used the balance from last FY. The provision used for construction WIP (available in their AR under Note 15) should provide a gauge of how well and how fast the Brazilian yard is turning around. Unfortunately, this info is only available once a year in their AR.

The provision used for construction WIP are:
2010 - 1 mil NOK
2011 - 11mil NOK
2012 - 128mil NOK
2013 - 437mil NOK

I gathered that they have better control over the Brazil yard problems now but it is not totally off their plate yet. Since the delivery has been much delayed, they might want to get it out asap to appease their customers even with some additional expenses.

Does any know whether this sort of provision is a deduction of revenue recognised or COGS?

(not vested)

[Clement]

Looking at the annual report, a few things strike me.

1)Results are impacted by goodwill impairment of 77m and extra provision for future contract losses of 567m. (New provision of 1004m - writeback of 97m - provisions used in the year of 340m)

2)Removing these effects, Profit attributable to shareholders will be 357 + 77 + 567*(1-0.34) or NOK808m or roughly 14 sg cents per share, assuming impairment is non tax-deductible and adjusting the provision by the Brazilian tax rate of 34%.

3)With contract loss provisions currently at 924m ~ 2.6x the amount provided in 2012 and ~2.7x the amount used in 2013, i don't think the impact of Niteroi on the FS will be significant going forward.

Seems like the expectation of EPS doubling is not that far fetched.

Taking into acct what Clement said, the PE is 7.4x for FY13. This probably gives a truer picture of VARD unedrlying performance. Going ahead, they shouldn't need to add more provision but may still used the balance from last FY. The provision used for construction WIP (available in their AR under Note 15) should provide a gauge of how well and how fast the Brazilian yard is turning around. Unfortunately, this info is only available once a year in their AR.

The provision used for construction WIP are:
2010 - 1 mil NOK
2011 - 11mil NOK
2012 - 128mil NOK
2013 - 437mil NOK

I gathered that they have better control over the Brazil yard problems now but it is not totally off their plate yet. Since the delivery has been much delayed, they might want to get it out asap to appease their customers even with some additional expenses.

Does any know whether this sort of provision is a deduction of revenue recognised or COGS?

(not vested)

Hi,

The provision works by reducing contracts WIP account thus increasing cogs, quite similar to an inventory write down.

[Harvest Time]

It is quite hard to trade on Vard.

Announce 1st contract, go up.
Announce next contract, sell on news.

[CityFarmer]

It is quite hard to trade on Vard.

Announce 1st contract, go up.
Announce next contract, sell on news.

Trading is hard and highly uncertain.

So we all prefer value investing, rather than trading.

(not vested)

[Greenhorns]

Is this the real reason why the company keep withholding the promised 30% dividend other than the 2 brazil yards?


The Board of Vard Holdings Limited (the "Company" and together with its subsidiaries, the
“Group”) wishes to inform that the Company has received a tax claim for FY2010 from tax
authorities in Brazil, and is evaluating the need for provisions for additional tax cost.
In a matter relating to transfer pricing of goods and services delivered from the Group’s
Norwegian entities to Vard Niterói in FY2010, and tax treatment thereof, the Company has been
notified that Brazilian authorities have concluded a tax assessment resulting in an additional tax
claim of approximately NOK 200 million including penalties and interest accrued. The diverging
assessment originates from conflicting Brazilian transfer pricing rules, which have only been
aligned as from FY2013.
The Company will file an appeal against the ruling, and no payments are expected to be made
before a final conclusion of the case, which may take several years. No provisions have
previously been made for this claim as such unfavorable assessment was deemed highly unlikely,
based on legal and tax advice received by the Company.
The Company is currently reassessing the probabilities for the outcome of the tax dispute, and
the need for provisions in its financial accounts. Further details will be disclosed latest when the
Company announces the unaudited results for the third quarter ending 30 September 2014.

[Stecano]

Is this the real reason why the company keep withholding the promised 30% dividend other than the 2 brazil yards?


The Board of Vard Holdings Limited (the "Company" and together with its subsidiaries, the
“Group”) wishes to inform that the Company has received a tax claim for FY2010 from tax
authorities in Brazil, and is evaluating the need for provisions for additional tax cost.
In a matter relating to transfer pricing of goods and services delivered from the Group’s
Norwegian entities to Vard Niterói in FY2010, and tax treatment thereof, the Company has been
notified that Brazilian authorities have concluded a tax assessment resulting in an additional tax
claim of approximately NOK 200 million including penalties and interest accrued. The diverging
assessment originates from conflicting Brazilian transfer pricing rules, which have only been
aligned as from FY2013.
The Company will file an appeal against the ruling, and no payments are expected to be made
before a final conclusion of the case, which may take several years. No provisions have
previously been made for this claim as such unfavorable assessment was deemed highly unlikely,
based on legal and tax advice received by the Company.
The Company is currently reassessing the probabilities for the outcome of the tax dispute, and
the need for provisions in its financial accounts. Further details will be disclosed latest when the
Company announces the unaudited results for the third quarter ending 30 September 2014.

Too bad. The price dropped 6%. Looks like Brazil needs some funds.