The shipyard Viktor Lenac expects a new larger contract for the repair of the U.S. Navy command ship USS Mount Whitney, and by the end of the year, a recovery in business and positive financial results, it was learned on Tuesday from this Kostrenska shipyard.
CEO Aljoša Pavelin stated that the conclusion of the tender process and the official decision on the selection of the contractor for another repair of a U.S. Navy ship is still awaited, after two such larger jobs have already been completed at the Kostrenska shipyard, with the repair and modification from 2015 contracted for more than $21 million.
– We have made our best offer and believe it will be sufficient for this project of exceptional importance to return to the Croatian shipyard. If we get this job, the work should start at the end of 2016 and last until mid-2017, which will provide us, in addition to significant revenue, with stable employment capacity and open up space for further efficiency increases, he said.
On the websites of the U.S. Department of Defense, it was announced on Monday that Viktor Lenac received a contract for the repair of the USS Mount Whitney on August 26 of this year, worth nearly $21 million. This contract, it is stated, contains 14 options that, if exercised, could raise the total value of the contract to nearly $32 million. The completion of the work is expected by July 2017, according to the U.S. Department of Defense’s website.
In response to a question about business operations, Pavelin noted that the Viktor shipyard achieved total revenue of 109.5 million kuna in the first half of 2016, but also a net loss of 9.3 million kuna. He emphasized that the total revenue achieved almost entirely relates to ship repair business activities, with a total of 35 projects completed, which is in line with the annual average, but there is a noticeable decline in the average value of individual projects.
– For example, the average project value in 2014 was 4.6 million kuna, in 2015 even 6.2 million kuna, while in the first half of 2016 it amounted to only 3 million kuna, Pavelin noted, explaining that the reason for this is the recession in the shipping market, where the excess of shipping capacity relative to global demand fosters fierce competition among shipowners, which is reflected in falling freight rates, resulting in cuts to fleet maintenance budgets.
As a result, he emphasizes, shipowners spend minimal funds during repair work, mainly to meet the regulations of classification societies, with the aim of obtaining certificates for navigation, so this situation intensifies competition in the repair market and leads to a decline in repair work prices.
Pavelin stated that the Viktor Lenac shipyard expects a more positive development of events in the second half of the year and aims to conclude the year with a positive result. Although they do not expect a significant recovery in the market, they say that shipowners still have to carry out repairs that they have postponed due to unfavorable market conditions.
– There is a noticeable trend of increasing sales opportunities, and by reorganizing the marketing and sales sector, we have further approached our clients and thus become significantly more concrete and faster in closing deals, he emphasizes, noting that at the beginning of August, a total of 30 ships were in the bidding or contracting phase and that the shipyard receives new inquiries from shipowners daily.
A reorganization of the technical and production sector has also been carried out, he says, with the aim of increasing process efficiency and productivity of people, through better organization of work and the introduction of new technologies.
– This aims to achieve additional savings and thus reduce business expenses, which, along with planned revenue, should be sufficient for a positive result at the end of the year, said CEO Pavelin.
