Davie Yards Inc. (TSX: DAV) today released its financial and operating results for the six month period ended June 30, 2008.
Update on Financial Situation
Revenue for the six months ended June 30, 2008 was US$22.6 million. EBITDA was negative US$51.0 million, and the Company recorded a net loss of US$54.8 million.
On the arrival of our new Chief Executive Officer, Steinar Kulen, at the end of Q1 2008, a thorough review of the Corporation's processes and projects was initiated. This review has identified weaknesses in the Corporation's operation. Productivity is lower than previously estimated, due to higher than expected complexities in the vessel construction processes and a more challenging ramp-up of the yard. Lower productivity and a very tight building program has forced the yard to increase subcontracting and thereby increasing costs. Davie has also been affected, along with the rest of the shipbuilding industry, by the recent significant increases in the price of materials. The Corporation has made a loss provision of $36.1 million for the vessels under construction.
Going Concern Uncertainty
The Corporation has incurred significant operating losses and cash outflows from operations and has negative working capital as at June 30, 2008. The Corporation's cash situation is not presently sufficient to fund expected future cash requirements after 6 months. The ability of the Corporation to continue as a going concern is dependent upon raising additional financing and achieving future profitable operations.
Future Outlook
The Corporation has done a thorough competitive study of the yard and concluded with a clear cost advantage relative to the yards competitors in European which is only expected to improve going forward. Davie is addressing its operating processes, and with the changes that are being implemented, management strongly believes in the competiveness of the yard in building complex offshore vessels and rigs. Market reports conclude on a still positive market outlook for complex offshore service vessels and rigs, which is expected to last for the coming years, giving Davie an interesting future potential. -- www.cnxmarketlink.com
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