Disclaimer This presentation should be read in conjunction with Vard - - PowerPoint PPT Presentation

Disclaimer

This presentation should be read in conjunction with Vard Holdings Limited’s results for the period ended 31 December 2015 in the SGXNet announcement. Financial figures are presented according to SFRS. This presentation may contain forward-looking statements that involve risks and uncertainties. Such forward-looking statements and financial information involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements and financial

• information. Such forward-looking statements and financial information are based on numerous assumptions

regarding our present and future business strategies and the environment in which we will operate in the future. As these statements and financial information reflect our current views concerning future events, these statements and financial information necessarily involve risks, uncertainties and assumptions. Actual future performance could differ materially from these forward-looking statements and financial information. You are cautioned not to place undue reliance on these forward looking statements, which are based on the Company’s current view of future events.

29.02.2016 | Page 2

4Q & FY 2015 Results Presentation

Vard Holdings Limited

29 February 2016

4Q 2015 key messages

29.02.2016 | Page 4

• Revenue of NOK 3 320 million, down from

NOK 4 500 million in 4Q 2014

• EBITDA (before restructuring cost) of NOK

35 million, down from NOK 120 million in 4Q 2014

• EBITDA margin (EBITDA before restructuring cost to

total operating revenues) of 1.1% (4Q 2014: 2.7%)

• Order intake of NOK 955 million; one new vessel

contract secured

• 29 vessels in the order book as at 31 December

2015, of which 18 are VARD designs

• Capacity utilization on the decrease due to

declining order book; restructuring and cost improvement programs ongoing

• New business plan and strategy developed to

reduce dependency on offshore oil and gas business during the downturn; strong support from major shareholder FINCANTIERI through long-term business opportunities and synergies

Hull 830 – OSCV for Solstad during towage to Vard Brattvaag

Business update

4Q 2015

29.02.2016 | Page 5

Vessel deliveries

29.02.2016 | Page 6

One vessel delivered in 4Q 2015

MMA Plover from Vard Vung Tau (Vietnam) to MMA Offshore

Design: VARD 1 08 | Platform Supply Vessel

New contracts

One offshore vessel for an undisclosed international client

Design: VARD | Delivery: 4Q 2017 Contract value: Undisclosed

One new contract secured 4Q 2015

17 031 16 675 15 096 19 356 17 743 10 230 5000 10000 15000 20000 2010 2011 2012 2013 2014 2015 3 594 2000 4000 6000 8000 10000 12000 14000 16000 2010 2011 2012 2013 2014 2015

Order book value at the end of the period (NOK million)

Order book development

29.02.2016 | Page 7

New order intake during the period (NOK million)

4Q 2015: 955 million 9M 2015: 2 639 million

Note: Includes firm orders only. Includes variation orders, repair and conversion, and equipment sales

27 vessels 28 vessels 16 vessels 16 vessels 15 vessels 6 vessels

As at 31 December 2015, the Group had 29 vessels in the order book, 18 of which will be of VARD’s own design.

Type Norway/Romania Brazil Vietnam Total

AHTS

1

1 PSV OSCV Other AHTS 10 PSV 1 OSCV 5 2 Other 2 AHTS 1 1 18 PSV 4 1 OSCV 5 1 Other 2 3 AHTS 1 12 PSV 2 3 OSCV 3 Other 2 1 18 10 1 12 2 4 6 8 10 12 14 16 18 20 2015 2016 2017 2018

Under construction Delivered

Order book status

29.02.2016 | Page 8

Order book as of 31 December 2015 (# of vessels)

Region Order book 30 Sep 2015 Deliveries 4Q 2015 Order intake 4Q 2015 Order book 31 Dec 2015 Norway / Romania 18

• 1

19 Brazil 10

• 8

Vietnam 3 1

• 2

Total 31 1 1 29 Vessel type Order book 30 Sep 2015 Deliveries 4Q 2015 Order intake 4Q 2015 Order book 31 Dec 2015 AHTS 3

• 3

PSV 7 1

• 6

OSCV 12

• 1

13 Other 9

• 7

Total 31 1 1 29 By vessel type

Order book by region and vessel type

29.02.2016 | Page 9

By region

Note: Contracts for two Other vessels for delivery from Brazil terminated in 4Q 2015 and excluded from order book

Market

• Oil prices and OSV fleet utilization at 10-year lows
• Global Exploration and Production (E&P) spending

dropped by ~25% in 2015, and further tightening expected going forward

• OSV utilization for high-end vessel segments down

from historic average of 95% to 75%; oversupply situation expected to continue short to medium term due to large orderbook still to be delivered

• OSCVs not operating in spot market – utilization

drop expected when more vessels come off contracts during 2016-2017

• Medium term recovery expected to be driven by

2016-2017 shake-out in OSV segment, with older vessels being withdrawn from active supply

• OSCV newbuilding demand driven by IMR market

and need for purpose built vessels

29.02.2016 | Page 10

• Shipowners requesting delivery postponements
• Elevated counterparty risk
• Banks aiming to reduce offshore exposure
• In short term, new project opportunities for VARD

primarily in niche markets and non-core segments

• Base load utilization of Romanian yards to be

secured by construction of sections of cruise ship hulls for FINCANTIERI

Source: Cardo Partners

Operations – Norway

• Installation of topside equipment and outfitting in

progress on several large and complex OSCV projects – including yard no. 830 (OSCV for Solstad) – largest offshore vessel ever built by VARD

• Cost reduction and efficiency improvement

programs continue

• Temporary layoffs used to buffer effects of periods
• f lower capacity utilization at all yards
• Headcount reduction from 1 797 to 1 657

employees1 in Norwegian entities during FY 2015 (- 8%)

• Aukra yard has started work on first projects in

aquaculture sector

• Vard Electro benefiting from synergies with

FINCANTIERI – increasing business volume for cruise and naval projects

29.02.2016 | Page 11

Hull 830 – OSCV for Solstad at Vard Brattvaag

1) Net headcount reduction including natural attrition, early retirement and permanent layoffs. Does not include temporary layoffs.

Operations – Romania

29.02.2016 | Page 12

Cruise ship hull section under construction at Vard Tulcea, Romania

• Four hulls delivered from Romania to Norwegian

yards during 4Q 2015

• Lower yard utilization resulting from declining order

book; restructuring and cost reduction programs continue

• Headcount reduction from 6 398 to 4 665

employees1 in Romanian subsidiaries during FY 2015 (- 27%)

• Contract received to enlarge FINCANTIERI-owned

barge in Tulcea, to enable launching of larger hulls

• Technical discussions ongoing for construction of

large outfitted sections for cruise ships for FINCANTIERI

1) Net headcount reduction including natural attrition, early retirement and permanent layoffs.

Operations – Vietnam

29.02.2016 | Page 13

MMA Plover during firefighting tests at Vard Vung Tau

• One PSV delivered to MMA Offshore during

4Q 2015, and a second one since the end of the quarter

• Work continues on second PSV with contract

terminated in early 2015; modifications undertaken to increase market attractiveness

• One vessel – OSCV for Farstad – remaining in order

book

Operations – Brazil

29.02.2016 | Page 14

Vard Niterói

• Remaining two projects nearing completion

– delivery expected in 2Q 2016 Vard Promar

• First vessel (LPG carrier for Transpetro) built entirely

at Vard Promar delivered in January 2016

• Contracts for two LPG carriers for Transpetro

terminated in 4Q 2015; cancellation is being disputed by VARD but limited financial impact due to the vessels being in early stages of construction

• Legal proceedings against Transpetro initiated to

recover cost related to LPG carrier project

• Positive development in productivity in critical areas

at Vard Promar; recent project progress in line with forecasts – but execution risks remain

Barbosa Lima Sobrinho | 7,000 m3 Fully Pressurized LPG Carrier for Transpetro

Key financials

4Q 2015

29.02.2016 | Page 15

Revenues, EBITDA and net income

29.02.2016 | Page 16

Profit (loss) attributable to equity holders of the Company (NOK million)

195

• 520

154

• 83

(800) (600) (400) (200) 200 400 600 9M 2014 4Q 2014 9M 2015 4Q 2015

Revenues (NOK million)

8 423 7 823 4 500 3 320 2 000 4 000 6 000 8 000 10 000 12 000 14 000 FY 2014 FY 2015 11 143 12 923

EBITDA (NOK million)

2.7%

Profit (loss) for the period (NOK million)

30

• 1 122

20

• 170

(1 400) (1 200) (1 000) (800) (600) (400) (200) 200 9M 2014 4Q 2014 9M 2015 4Q 2015 309

• 356

120 35 (500) (300) (100) 100 300 500 9M 2014 4Q 2014 9M 2015 4Q 2015 429

• 321

50

• 1 292

349

• 603

1.1%

Includes net foreign exchange loss of NOK 474 million, of which NOK 380 million are unrealized

Income statement

29.02.2016 | Page 17

(NOK million) 4Q ended 31 December FY ended 31 December 2015 2014 2015 2014 Revenue 3 320 4 500 11 143 12 923 EBITDA before restructuring cost 35 120 (321) 429 EBITDA margin (%) 1.1% 2.7%

• 2.9%

3.3% Restructuring cost (21)

• (77)
• Depreciation, impairment and amortization

(81) (35) (235) (189) Operating profit (loss) (67) 85 (633) 240 Net financial income / (cost) (92) 15 (571) (37) Profit (loss) before tax (163) 118 (1 204) 238 Profit (loss) for the period (170) 20 (1 292) 50 Non-controlling interest (87) (134) (689) (299) Profit (loss) attributable to equity holders of the Company (83) 154 (603) 349

Cash and cash equivalents, and loans and borrowings

29.02.2016 | Page 18

Net cash (NOK million)1 Construction loans (NOK million)

392

• 1 115
• 1 200
• 800
• 400

400 31 Dec 2014 31 Dec 2015 7 663 9 435 2 000 4 000 6 000 8 000 10 000 31 Dec 2014 31 Dec 2015 (1) Cash and cash equivalents less sum of short- term and long- term interest bearing liabilities, excluding construction financing

Cash and cash equivalents (NOK million)

1 966 720 36 199 400 800 1 200 1 600 2 000 2 400 31 Dec 2014 31 Dec 2015 Non-restricted Cash Restricted Cash 2 002 919

Loans and borrowings, non-current (NOK million)

1 204 1 200 200 400 600 800 1 000 1 200 1 400 31 Dec 2014 31 Dec 2015

Cash and cash equivalents, and loans and borrowings (cont’d)

29.02.2016 | Page 19

• Due to the extraordinary market situation and increased counterparty risk, cash preservation and

financing of the operations have been a focus area also during 4Q 2015

• In expectation of a decrease in net working capital, the Group negotiated and obtained waivers of

working capital covenants from banks before concluding on the balance sheet as at 31 December

• 2015. Additional waivers may be required during 2016
• During the first months of 2016, the Group has taken actions to strengthen the balance sheet and
• liquidity. As a result, VARD expects to be able to secure new construction loans needed to finance
• ngoing as well as future projects
• The projects requiring highest working capital are nearing completion, and continue to tie up

significant cash; this is expected to change with the delivery of these projects in 2Q 2016

Balance sheet

29.02.2016 | Page 20

(NOK million) As at: 31 December 2015 31 December 2014 Non-current assets 3 760 3 786 Cash and cash equivalents 919 2 002 Other current assets 16 216 13 661 Total assets 20 895 19 449 Total equity 2 961 3 864 Loans and borrowings, non-current 1 200 1 204 Other non-current liabilities 209 248 Construction loans 9 435 7 663 Other current liabilities 7 090 6 470 Total liabilities 17 934 15 585 Total equity and liabilities 20 895 19 449

Cash flow statement

29.02.2016 | Page 21

(NOK million) 4Q ended 31 December FY ended 31 December 2015 2014 2015 2014 Cash flows from / (used in) operating activities (51) 376 (1 184) 690 Cash flows from / (used in) investing activities (66) (410) (311) (865) Cash flows from / (used in) financing activities (8) 439 219 433 Net change in cash and cash equivalents (125) 405 (1 276) 258 Effects of currency translation differences 80 26 30 45 Cash and cash equivalents excluding restricted cash at the beginning

• f the financial period

765 1 535 1 966 1 663 Restricted cash at the end of the financial period 199 36 199 36 Cash and cash equivalents at the end of the financial period 919 2 002 919 2 002

Earnings per share

29.02.2016 | Page 22

4Q ended 31 December FY ended 31 December 2015 2014 2015 2014 Earnings for the period (NOK million) (83) 154 (603) 349 Earnings for the period (SGD million) (13) 27 (97) 62 Weighted average number of shares (million) 1 180 1 180 1 180 1 180 Earnings per share (NOK) (0.07) 0.13 (0.51) 0.30 Earnings per share (SGD cents) (1.10) 2.29 (8.22) 5.25 Exchange rates (SGD/NOK) 6.239 5.622 6.239 5.622

Note: Earnings per ordinary share for the financial period attributable to equity holders of the Company SGD amounts are translated from NOK based on the exchange rates prevailing at the reporting dates.

Net assets value per share

29.02.2016 | Page 23

As at: 31 December 2015 31 December 2014 Net assets value at the end of the period (NOK million) 3 798 4 132 Net assets value at the end of the period (SGD million) 609 735 Number of shares (million) 1 180 1 180 Net assets value per ordinary share (NOK) 3.22 3.50 Net assets value per ordinary share (SGD) 0.52 0.62 Exchange rate (SGD/NOK) 6.239 5.622

Note: Net assets value for the Group per ordinary share based on issued share capital of the issuer SGD amounts are translated from NOK based on the exchange rates prevailing at the reporting dates.

New business plan and strategy

4Q 2015

29.02.2016 | Page 24

Background

29.02.2016 | Page 25

• VARD is facing the dual challenge of a severe cyclical downturn in its core market, and managing the turn-around

in Brazil

• VARD’s core market for offshore oil and gas related vessels continues to be weak in the short term, with timing of

a recovery dependent on oil price development and renewed investment in the industry

• A new business plan and strategy have been developed that aim to enable VARD to
• reduce its dependency on the offshore business
• preserve its core expertise and skilled employee base during the downturn, and
• utilize its existing shipbuilding capacity until an eventual recovery in its core market
• The diversification into other engineering- and technology-intensive shipbuilding segments is based on
• leveraging existing relationships and capabilities, and
• realizing synergies and increased cooperation with the parent group, FINCANTIERI
• Cost reduction and efficiency improvement programs are being intensified in order to enhance competitiveness

in core and new markets

VARD has developed a business plan with solid long-term prospects

29.02.2016 | Page 26

VARD to diversify into new vessel segments and geographies Updated yard structure in Europe to reflect new target markets and reduce

• verall cost base

Decision to maintain presence in Brazilian market but with operations adapted to expected future local market demand Lowering of cost position critical to succeed in core and new markets

• Continued focus on rightsizing of operations
• Operational improvements to increase productivity and quality
• Strengthen procurement efficiency
• Increase scope of work in Romania to lower average cost position
• Promar to realize its full potential when the current challenging order book is completed
• Process initiated with the client Transpetro and other stakeholders in to recover extra cost incurred in LPG carrier project
• Niterói yard to phase out shipbuilding activities after completion of current order book
• Brattvaag, Langsten and Søviknes to concentrate on core market segments and highly specialized vessels
• Aukra to be dedicated to aquaculture market; Brevik also to develop new business opportunities to fill excess capacity
• Further develop Tulcea yard capabilities and capacity to provide highly cost-effective hull production
• Both Braila and Tulcea yards to develop capabilities to deliver complete vessels of lower complexity
• Leverage existing capabilities and relationships to penetrate offshore wind and aquaculture markets, and pursue offshore
• pportunities in Middle East growth region
• Utilize synergies with FINCANTIERI to enter cruise and Offshore Patrol Vessel (OPV) segments where FINCANTIERI is present
• Establish production of vessel sections for FINCANTIERI, providing base load for the Tulcea yard in the next years

1 2 4 3

Diversification into new vessel segments, geographies and vessel concepts have been explored – in addition to increased cooperation with FINCANTIERI

29.02.2016 | Page 27

New market opportunities have been explored based on VARD’s competitive strengths, capabilities and relationships

Extensive track- record from offshore vessel segment Modern production facilities in Romania and Vietnam FINCANTIERI synergies

100+ vessels delivered by VARD last 5 years

Leading builder of prototypes

• # 1 builder of advanced OSVs and OSCVs
• Long-standing experience in building high-end vessels for harsh

environments

• World class concept design and engineering resources
• Leading expertise in building of prototypes
• FINCANTIERI world leading builder of passenger vessels and naval

vessels

• Global sales and design network
• Modern, high capacity hull-production facilities in Romania
• Investments in upgrades and automation during recent years
• Increasing degree of hull completion

New vessel concepts III New vessel segments New geographies I II

? ? ? FPU/FPSO Fishing trawlers Navy Research vessels

?

Group value chain integration IV

Vessel

• utfitting

Hull / steel works Design

Diversification

1

New market opportunities identified leverage VARD’s expertise as a leading vessel builder of engineering- and technology-intensive vessels

29.02.2016 | Page 28

Aquaculture Exploration Cruise

Synergies with FINCANTIERI

OPV Middle East

A B E

Offshore Wind

D

Leverage existing relations, brand and capabilities

UAE Iran Caspian Sea Saudi Arabia

• VARD targeting the cruise market with high-end concepts combining capabilities from offshore, research and passenger vessels
• Expertise within ice class hulls and dynamic positioning well suited for vessels operating in the arctic
• Significant synergies with FINCANTIERI, as the leading builder of cruise vessels in the world
• Positive outlook for Offshore Patrol Vessel (OPV) market
• Vard Marine already a leading provider of innovative and cost-effective OPV designs
• FINCANTIERI with extensive track-record and global network in naval segment
• Middle East region with comparatively strong activity in OSCV market going forward
• Lifting of sanctions on Iran expected to lead to increased demand for vessels in region
• VARD with previous deliveries and existing customer relations in the region
• Upcoming offshore wind farms being installed deeper and longer from shore, leading to increased demand for more advanced

Service Operations Vessels (SOVs)

• VARD well positioned to offer state-of-the-art SOVs utilizing strong experience from the offshore oil and gas market
• Aquaculture market with strong growth and positive outlook
• Vard Aukra located in the maritime cluster on the west coast of Norway; to be repositioned as supplier to the aquaculture industry
• Initial focus on vessels and barges, but with expected broadening of product offering; first orders already secured

C

Diversification – new market opportunities

1

Opportunity to produce sections for FINCANTIERI cruise ships strengthens cooperation and provides work for Romanian yards during the downturn

• Supporting FINCANTIERI in managing the significant order backlog acquired in cruise vessels

29.02.2016 | Page 29

Production of hull sections for FINCANTIERI Synergies between VARD and FINCANTIERI

• Long term production gives stability for

Romanian yards

• Best practice sharing
• Know-how transfer on passenger vessels
• Increase capacity through access to high quality

and reliable/efficient production assets

• Flexible hull production set-up
• Risk mitigation – reduce pressure on own value

chain and manage order backlog

• Technical discussions ongoing for construction of large
• utfitted hull sections for FINCANTIERI from late 2016 to

2020 , providing base load for Romanian yards

• Strong long-term support from the main shareholder

through strengthened cooperation

• Vard Tulcea with proven capability for successful and

profitable delivery of cruise vessel sections ‒ One section delivered in 4Q 2015 ‒ One for delivery in 1Q 2016

Diversification – synergies with FINCANTIERI

1

Romania Norway

Production footprint adapted to new market strategy

• Aukra dedicated to aquaculture, Brevik also to develop adjacent business opportunities

29.02.2016 | Page 30

Norwegian yards Vard Aukra

Aquaculture market entry supported by a dedicated yard

Romanian yards

Bulgaria

Tulcea Braila Langsten Brattvaag Brevik Søviknes Aukra

• Yards used for outfitting of highly specialized vessels in core market and

new focus segments

• Adjacent business (e.g. fabrication of subsea modules and equipment, and

vessel repairs) required to fill excess capacity in period of low volumes

Vard Vung Tau

Vung Tau

VARD quality and competence combined with a low-cost production set-up

• Modern, cost-effective hull production

facilities

• Developing capabilities to deliver more

complete vessels of lower complexity

• Production of cruise ship hull sections

for FINCANTIERI

Vietnam

China

Yard structure

2

Maintaining presence in Brazil but with operations adapted to expected local market demand in a more stable local environment

29.02.2016 | Page 31

Current status Going forward

• Consistent progress in construction and delivery of current

challenging order book

• Increased visibility on LPG carrier project, with two vessels

delivered, two in advanced stages of construction, and only two more in order book

• Last remaining AHTS in Niterói orderbook to be delivered in

2Q 2016

• Progress on PLSV projects
• Positive development in productivity in critical areas at Vard

Promar; recent project progress in line with forecasts – but execution risks remain

• Risk mitigating actions put in place to succeed
• Process initiated with Transpetro and other stakeholders to

recover extra cost incurred in LPG carrier project

• Long-term ambition for VARD to remain a key player in the

Brazilian shipbuilding industry, supporting the local oil and gas industry in a stabilizing environment

• Local content requirements will continue to drive demand for

Brazilian-built vessels – still many vessels under international flag with potential to be replaced by local tonnage

• Proven expertise to build complex OSCVs locally; VARD well

positioned to win new contracts in Brazil

• Vard Promar one of the most modern shipbuilding facilities in

South America; few remaining yards in Brazil with similar capabilities

• Short-term focus on on-time completion of current order book;

Vard Promar to realize its full potential medium term

• Phasing out of shipbuilding activity at Niterói after completion of

the current order book

Brazil

3

Improvement intitiatives ongoing and under development to ensure success

• f the new business plan

29.02.2016 | Page 32

Levers to increase cost competitiveness Initiatives to support new business development

• Strengthen concept development, design, sales and

marketing organizations with resources dedicated to new target vessel segments

• Establish local presence in Middle East region
• Dedication of Aukra yard to target aquaculture market
• Develop adjacent business to fill excess capacity in

Norwegian yards

• Continued focus on rightsizing of operations
• Increased scope of work in Romania to lower average

cost position

• Acceleration of cost- and efficiency improvement

programs

• Further optimize design and engineering processes to

increase efficiency and quality

• Review sourcing and procurement models; strengthen

procurement efficiency

• Further productivity development at Vard Promar

throughout all stages of production

Improvement initiatives

4

Revenue target

Business plan foresees medium-term recovery to 12-13 BNOK in revenue; low point expected in 2016 but with positive EBITDA margins

29.02.2016 | Page 33

’20 ’16 12-13 8-9 ’15 ’13 ’14 ’11 ’12 12.4 12.9 11.2 11.1 11.1

Figures in BNOK

Outlook

• Deterioration of offshore vessel market resulting

in revenue drop for 2015 and further drop expected for 2016

• Target to reach previous highs in revenue again

by 2020

• Comprehensive cost and efficiency program

initiated to improve margins

• Short term margins impacted by restructuring

and market entry into new segments, but positive EBITDA margin expected for 2016

Outlook

4Q 2015

29.02.2016 | Page 34

Outlook

29.02.2016 | Page 35

• Core market for offshore oil and gas related vessels continues to be weak in the

short term

• Diversification into other engineering- and technology-intensive market segments

to reduce dependency on offshore business during the downturn; medium term recovery expected

• New focus segments identified where VARD can leverage existing relationships and

capabilities, and synergies with FINCANTIERI, maintaining expertise and securing utilization of existing yard capacity

• Base load utilization for Romanian yards to be secured by construction of sections
• f cruise ship hulls for FINCANTIERI
• Cost reduction and efficiency improvement programs are being intensified in order

to enhance competitiveness in core and new markets

• Brazil operations to focus short term on completion of current order book;

Vard Promar to realize its full potential in the medium term

• Revenue drop to 8-9 BNOK expected for 2016, with positive EBITDA margin.

Recovery to 12-13 BNOK revenue targeted with new business plan by 2020, also on the back of an expected recovery of the offshore market from 2018

29.02.2016 | Page 36

4Q 2015

Q&A