November 8, 2019 / 11:59 AM / 13 days ago

Fincantieri hints at more pain from Vard restructuring

MILAN, Nov 8 (Reuters) - Italian shipbuilder Fincantieri said efforts to restructure its Norwegian unit Vard could bring additional costs, sending shares down more than 5% on Friday.

The group is not ruling out an impairment of Vard, a company focusing on offshore and specialized vessels which was acquired by Fincantieri in 2013, executives said in a post-results call.

The Italian group said it would announce possible higher costs for the overhaul of the subsidiary when publishing 2019 full-year results.

“The business fundamentals remain intact but we have to take tough decisions,” Chief Financial Officer Giuseppe Dado said.

Shares in Fincantieri fell 5.6% at 1110 GMT, underperforming a flat Milan all-share index.

The restructuring of Vard already dented nine-month results for the group, Fincantieri said late on Thursday.

Fincantieri said earnings before interest, tax, depreciation and amortization (EBITDA) for the offshore and specialised vessels business - Vard’s core activity - was negative by 75 million euros in the first nine months. The EBITDA was negative 4 million euros in the same period last year. Sales for the business were shrinking.

The problems at Vard hit profitability for the entire group despite a strong performance of Fincantieri’s activity in building cruise ships and naval vessels.

The EBITDA margin for the whole group fell to 6.7% between January and September and Dado did not confirm a previous guidance of a margin at 7.6% for the whole of 2019.

He added that Fincantieri had already decided to close Vard’s Aukra and Brevik yards in Norway and was still reviewing its output capacity in the country.

Apart from these two yards to be closed, Vard has three yards in Norway, two in Romania, one in Brazil and one in Vietnam.

The group’s total revenue rose 10% to 4.25 billion euros ($4.7 billion)in the first nine month, driven by cruise ship and naval vessels business and also by a good performance in its equipment, system and services business. ($1 = 0.9059 euros) (Reporting by Francesca Landini, Editing by William Maclean)

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