Record-orders boost shipyards turnover, lack of hedging deepens losses

Furthermore, losses were registered in spite of an average 150 percent increase in turnover year-on-year in the industry, according to the President of Ship Builders National Association (ANCN), Gelu Stan.

Data published by the Economy and Finance Ministry show the top six shipyards locally posted business totaling €216 million last year, while total turnover amounted to €92.1 mln in 2006.

The engines of this industry were the two units controlled by international giant Aker Yards - Aker Braila, with turnover close to €80 mln, more than double on 2006, and Aker Tulcea, which registered a 150 percent annual growth, up to €60.2 mln.

According to Stan, orders reached a record-high in 2005-2007 globally. “In two years, ships able to replace 25 percent of the existing fleet worldwide were ordered, or five times more compared to usual orders per year,” he said.

However, Stan does not expect similar orders this year, so shipyards could register “zero growth” because of higher prices for raw materials and low labor productivity.

Furthermore, the boost in orders and turnover did not lead to higher profits. Aker Braila’s losses increased eight times year-on-year, to some €16 million. Aker Tulcea’s profit amounted to €1.4 mln, or half of 2006 earnings. Damen Galati closed 2007 with losses worth €0.2 mln, compared to €2.6 mln in profits in 2006.

“Who did not use hedging to protect against national currency depreciation against the euro lost. We, at Damen, did not use hedging in 2007, but we are using it this year,” said Stan, who is also General Manager of the Galati-based shipyard.