Philly Shipyard Reports Q4 2018, FY 2018 Results
As of 31 December 2018, the two-containership order for Matson is approximately 95% complete. On 31 October 2018, Philly Shipyard delivered the first vessel (Hull 029) in the two-containership order for Matson. Philly Shipyard continued to idle certain operations and impose layoffs due to the lack of new orders after the Matson project.
Key Financial Data:
- Fourth quarter and full year 2018 operating revenues and other income of USD 19.4 million and USD 129.2 million, respectively, compared to USD 198.7 million and USD 614.6 million in the same periods in 2017.
- Fourth quarter and full year 2018 EBITDA of negative USD 3.4 million and negative USD 33.4 million, respectively, compared to USD 39.3 million and USD 105.1 million in the same periods in 2017.
- Fourth quarter and full year 2018 net loss of USD 9.0 million and USD 45.4 million, respectively, compared to net income of USD 30.7 million and USD 67.2 million in the same periods in 2017.
- Total cash and cash equivalents of USD 49.6 million at 31 December 2018, excluding USD 44.6 million of restricted cash for securing a loan and a guarantee holdback.
- Order backlog of USD 17.4 million on 31 December 2018.
Operations and Shipping Investments
At the end of the fourth quarter of 2018, Philly Shipyard was building the second of two containerships for Matson (Hulls 029-030). Hull 029 (named Daniel K. Inouye) was delivered to Matson on 31 October 2018. This vessel is the largest containership ever built in the United States. Hull 030 was launched on 13 November 2018. The planned delivery date for Hull 030 remains Q1 2019.
While Philly Shipyard continues to actively seek new orders and the capital necessary to build vessels after Hull 030, it continues to adjust its operations and workforce in line with its current order backlog. These adjustments include idling additional parts of its facilities and laying off more of its employees. Currently, the only shipbuilding activity is in one of the two graving docks at the shipyard; all other production facilities are idle. Today, Philly Shipyard’s workforce (including direct employees and subcontracted personnel) totals slightly more than 400 people, down from approximately 1,200 people at the beginning of 2018.
Philly Tankers, a Jones Act shipping company that is majority-owned by Philly Shipyard, is proceeding with an orderly liquidation process for the purpose of distributing its available cash balances to its shareholders. Philly Shipyard expects these liquidating distributions will total approximately USD 83.1 million (including Philly Shipyard’s share of USD 44.6 million) and will be made in Q1 2019. To date, the dividends paid by Philly Tankers to its shareholders total USD 78.1 million (including Philly Shipyard’s share of USD 41.9 million).
As of February 6, Hull 030 is the last vessel in PSI’s order book. Securing contracts for new vessels is the key to unlocking Philly Shipyard’s potential for sustained operations and profitability. Due to the under-recovery of overhead costs (i.e., overhead costs incurred and not allocated to projects), Philly Shipyard expects it will suffer significant losses in 2019, even if the shipyard receives orders for new vessels.
In the near term, Philly Shipyard’s main focus is the pursuit of the opportunity to build National Security MultiMission Vessels (NSMV). The NSMV program seeks to replace up to five of the U.S. state maritime academy training ships. The U.S. Maritime Administration (MARAD) released a request for proposal (RFP) for a vessel construction manager (VCM) for the NSMV program. The VCM contract is expected to be awarded early this year. The VCM will then enter into a contract with a U.S. shipyard to build the vessels. The shipyard contract is expected to be awarded within Q2 2019. MARAD has received USD 300 million in federal funding for the first vessel. Delivery of the first vessel is targeted for the end of Q4 2021.
In addition, Philly Shipyard is in discussions related to several other potential new construction projects for U.S.-built vessels. Philly Shipyard is expanding its search for new opportunities throughout the marine industry. Philly Shipyard is also exploring potential partnerships that can create a stronger entity to secure new work into the shipyard and create value for the Company and its shareholders.
Additionally, Philly Shipyard is aggressively pursuing several possibilities for short-term work to have some activity in the shipyard in 2019 before a production start of a new shipbuilding project. In particular, Philly Shipyard is pursuing opportunities for steel work and repair jobs to utilize idle capacity in its fabrication shops and dry-docks.
Source: Philly Shipyard Financial Reports