Triyards Holdings, the troubled shipyard unit of Ezra Holdings, confirmed the cancellation of two shipbuilding contracts worth $51m, which will no doubt exacerbate its already precarious financial position as it turned to a $162.5m full-year FY2017 net loss from a $17.8m profit in the previous corresponding period.
Triyards said in a stock market announcement that the loss was mainly due to the extremely competitive market environment and tight liquidity in the offshore and marine industry, particularly in Singapore.
Revenue plunged 64% to $208.7m from $324.9m previously with lower contributions from projects such as the six units of self-elevating unit, which were either delivered to clients or essentially completed by the end of FY17, lower contributions from Strategic Marine Group for the aluminium vessel construction projects as well as hits to revenue from possible cost overruns and provisions for some projects.
Yet other projects are within the contract cancellation period and the group has made certain provision for liquidated damages, while the reversal of revenue recognised from two of its chemical tanker shipbuilding contracts which were cancelled due to its inability to deliver by contractual delivery dates, also weighed on revenue.
“Currently the group is in discussion/negotiation with the respective customers and financiers” to try and minimise liquidated damages and deliver vessels successfully, Triyards added.
In review Triyards said: “FY2017 was a difficult year for the group in terms of its ability to secure the necessary financing for its projects, notably after the related/affiliated entities of Ezra Holdings have filed Chapter 11 of the United States Bankruptcy Code in early 2017.”
This was “compounded by the effect of extremely tight liquidity in the market and competitive market environment in offshore and marine industry” Triyards added and the effect of this on projects resulted in cost overruns and liquidated damages as well as at least two contract cancellations.
While Triyards reiterated that it is “in active and continuous engagement with various parties to recapitalise its balance sheet and improve the liquidity of the Group”, it warned that “as at the date of this announcement, no definitive agreements in relation to any of these discussion/negotiations have been entered into by the Group, and there can be no assurance or reasonable certainty that any discussions or prospects will be successfully concluded”.
The recapitalisation and liquidity improvement measures include potential fund raising via new loans and issue of new securities, as well as discussing with existing lenders and customers to obtain requisite financing so that projects can be delivered.
“While the group will continue its focus on strengthening its balance sheet, improving the liquidity, streamlining its operation with the aim to achieve positive operating cashflow, it is foreseen that next 12 months will remain extremely challenging,” Triyards concluded.
Source: SMNPrevious Next
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