Norwegian shipbuilder Aker Yards reported heavier-than-expected losses for the fourth quarter yesterday and fired chief executive officer Yrjo Julin after failing to manage soaring costs in its busiest-ever year.
'This is both disappointing and weak,' Chairman Svein Sivertsen, who will act as chief executive until a new CEO is found, told reporters. 'To have turnover of 34 billion crowns (S$9.1 billion) and not earn a crown speaks for itself.' Aker Yards shares dropped 4.6 per cent to 44.85 crowns by 1040 GMT, valuing the company at about US$980 million.
The stock fell 36 per cent in 2007 and is down 28 per cent in 2008.
Mr Sivertsen predicted Aker Yards would return to a core profit margin of 4 per cent this year and analysts said speculation about a possible split up of one of Europe's biggest shipyards prevented its shares from falling further.
Losses before interest, tax, depreciation and amortisation at one of Europe's biggest shipyards came to 500 million Norwegian crowns in October-December against a profit of 401 million in the same quarter a year earlier.
The result undershot forecasts of losses between 84 million and 234 million crowns in a Reuters survey of five analysts whose average estimate had been for a loss before interest, tax, depreciation and amortisation of 135 million crowns.
The fourth quarter was hit by problems at the Finnish yards and the Floroe yard in Norway, as previously communicated, Aker Yards said, but added that improvement measures at its cruise ship yard in Finland were starting to show results.
'There is still all-time high activity for the global shipbuilding industry,' Mr Sivertsen said. 'The cruise market is still hot. We see market growth of 6 to 8 per cent annually which will supply the market with eight to 10 new ships per year.' But he added that the company continued to face capacity constraints at its own yards and at subcontractors.
The losses put the company technically in breach of its debt covenants, Mr Sivertsen said, but added that he expected to get that in order in two to three months and said the financial situation was under control.
The biggest owner with a 39.2 per cent stake is South Korean STX Shipbuilding. Last Friday, Norwegian Saevik family-owned Havyard Group said it bought a 5.2 per cent stake.
The Havyard purchase has fuelled speculation that Aker Yards could be split up, with STX Shipbuilding possibly vying with Italy's Fincantieri for the cruise ship operations and Havyard possibly buying the offshore and specialised vessel unit.
Mr Sivertsen said the company was in a dialogue with STX and had not completed a review of its strategic options, but said he the Havyard stake purchase showed the company's is attractive.
Mr Sivertsen said he was confident Aker Yards would achieve its 2008 earnings before interest, tax, depreciation and amortisation (EBITDA) margin target of about 4 per cent, though the EBITDA margin was negative 5.2 per cent in the fourth quarter and zero per cent for the FY 2007.
'I am confident that we will see improvements through 2008,' Mr Sivertsen said in a statement. He said Aker Yards adopted a more hands-on management style to keep better control over projects.
A loss provision of 600 million crowns was taken in the quarter related to the Finnish operations and a further provision of 150 million for the Floroe yard, the group said.
Mr Sivertsen said the company did not expect to make any further loss provisions for the Finnish operations. Aker Yards fired Julin just eight months after it made the Finn CEO.
'This is both disappointing and weak,' Chairman Svein Sivertsen, who will act as chief executive until a new CEO is found, told reporters. 'To have turnover of 34 billion crowns (S$9.1 billion) and not earn a crown speaks for itself.' Aker Yards shares dropped 4.6 per cent to 44.85 crowns by 1040 GMT, valuing the company at about US$980 million.
The stock fell 36 per cent in 2007 and is down 28 per cent in 2008.
Mr Sivertsen predicted Aker Yards would return to a core profit margin of 4 per cent this year and analysts said speculation about a possible split up of one of Europe's biggest shipyards prevented its shares from falling further.
Losses before interest, tax, depreciation and amortisation at one of Europe's biggest shipyards came to 500 million Norwegian crowns in October-December against a profit of 401 million in the same quarter a year earlier.
The result undershot forecasts of losses between 84 million and 234 million crowns in a Reuters survey of five analysts whose average estimate had been for a loss before interest, tax, depreciation and amortisation of 135 million crowns.
The fourth quarter was hit by problems at the Finnish yards and the Floroe yard in Norway, as previously communicated, Aker Yards said, but added that improvement measures at its cruise ship yard in Finland were starting to show results.
'There is still all-time high activity for the global shipbuilding industry,' Mr Sivertsen said. 'The cruise market is still hot. We see market growth of 6 to 8 per cent annually which will supply the market with eight to 10 new ships per year.' But he added that the company continued to face capacity constraints at its own yards and at subcontractors.
The losses put the company technically in breach of its debt covenants, Mr Sivertsen said, but added that he expected to get that in order in two to three months and said the financial situation was under control.
The biggest owner with a 39.2 per cent stake is South Korean STX Shipbuilding. Last Friday, Norwegian Saevik family-owned Havyard Group said it bought a 5.2 per cent stake.
The Havyard purchase has fuelled speculation that Aker Yards could be split up, with STX Shipbuilding possibly vying with Italy's Fincantieri for the cruise ship operations and Havyard possibly buying the offshore and specialised vessel unit.
Mr Sivertsen said the company was in a dialogue with STX and had not completed a review of its strategic options, but said he the Havyard stake purchase showed the company's is attractive.
Mr Sivertsen said he was confident Aker Yards would achieve its 2008 earnings before interest, tax, depreciation and amortisation (EBITDA) margin target of about 4 per cent, though the EBITDA margin was negative 5.2 per cent in the fourth quarter and zero per cent for the FY 2007.
'I am confident that we will see improvements through 2008,' Mr Sivertsen said in a statement. He said Aker Yards adopted a more hands-on management style to keep better control over projects.
A loss provision of 600 million crowns was taken in the quarter related to the Finnish operations and a further provision of 150 million for the Floroe yard, the group said.
Mr Sivertsen said the company did not expect to make any further loss provisions for the Finnish operations. Aker Yards fired Julin just eight months after it made the Finn CEO.