In a profit guidance issued last night, Vard Holdings announced that it expects a marginally negative EBITDA result for 3Q14. Though significant investments have been made in order to reach production targets at Vard Promar in Brazil, slower-than-expected improvements in throughput and productivity at the new shipyard are impacting profitability during the ramp-up phase.

Additional cost was also incurred for the two vessels in the Promar order book that were built at a third-party yard and are currently undergoing outfitting at Vard Niterói. In 3Q14, Vard has also revised its estimates for a limited number of projects in its European order book where cost overruns were incurred.

Separately, regarding the tax claim received from authorities in Brazil and announced on 5 Aug 2014, Vard wishes to clarify that following further assessment of its legal position, it intends not to make any provisions for the tax claim in its financial accounts. With a change in analyst coverage, we put our HOLD rating and fair value estimate of S$0.94 under review.

Source: OCBC Research - 15 Oct 2014