Future bright though first half not too good: ABG Shipyard

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Future bright though first half not too good: ABG Shipyard

D Datar, chief financial officer of ABG Shipyard joins CNBC-TV18 to talk about the company’s financial performance in the quarter.

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D Datar, chief financial officer of ABG Shipyard joins CNBC-TV18 to talk about the company's financial performance in the quarter. He says that it is interest cost that affected input costs in terms of labour cost, thus impacting profits and margins. "But we see day rates firming on the upside and that will bode well for business," he says. Datar is confident of achieving the full-year targets of the company.

Below is the edited transcript of the interview. Also watch the accompanying video.

Q: Your EBITDA and PAT level performance is a bit subdued in the current quarter. Can you take us through why?

A: One is we don't compare these quarterly numbers but since you are asking, it is the inflation probably that everybody is worried about, is taking the input cost in terms of consumable direct labor, contract labor, they are going really high. I think that's the main reason for this. Interest rates have been going up very steep in India.

Q: How is the second half looking in that case and we hear that rig prices are beginning to move higher? What is it that you are penciling in on rig prices for the second half of the year?

A: We are very bullish on the sector growth prospects, we are seeing lot of activity and offshore ships, as well as rig market in the world. The day rates has improved from about Rs 90,000 per day to about Rs 130,000 in the southeast Asian market on the charter of premium stock of rigs. If you look at the North Sea market, the rates have moved upwards of Rs 250,000 a day and we have seen lot of enquiries coming to us in terms of rig deliveries and whether the rigs are available for sale or charter for long term.

Similar scene exists in the offshore supply ship, where the day rates have firmed up. Brazil, Mexico... they are all booming markets for these kinds of assets. We are seeing a lot of demand coming into our order book from all these quarters.

I think the next six months should be in line with what we have targeted as a budget for the year. And also, let's not forget that we have a small company called Western India Shipyard which is doing so well for us. For only six months this year there is about Rs 80 crore of top line whereas for the full last year it was about Rs 110 crore. They are doing lot of rig repairs, currently they have three rigs for repair. They are converting one naval frigate into carrier training ship.

So I think as a company as a whole on a consoled level we are looking very good in terms of next six months, so I am not really worried about what has happened in the first half of the year.

Q: What's the latest on the Mazagaon pact with Pipavav which you guys were questioning? Can you take us through where things are now?

A: I don't think this is a forum to talk about that, and we are really not against Mazagaon Shipyard or any shipyard going into a JV mode. The issue is only on the criteria and the openness of the whole process. So I think we have said what we had to say at that point of time.

Q: So just leave us with where the order book stands at right now for ABG Shipyard for the second half of this year?

A: The order book we are about Rs 14000 crore that represents about 96 vessels and our delivery rates for last three years have been very good. Last year we delivered about 16 ships, this year in the first half we have done about seven and I hope we will be able to fill up another 10-11 ships before March. So we are quite okay with the delivery rate and the order book positions panning out. So it's basically a question of whatever I am delivering is getting filled up so my order book still remains very healthy.