Last year Rigas kugu buvetava JSC (the Riga Shipyard) managed to increase its net sales by 20% compared to 2014, and made a EUR 0.2 million profit despite the fierce competition in the business of ship-building and repairs.
'It's a good result though it just fell short of the company’s plan to achieve a net turnover of EUR 22 million', according to Mr. Janis Skvarnovics, Chairman of the Board of the Riga Shipyard. He quickly adds that net turnover is just as important as net profit. ‘the Riga Shipyard ended 2015 with a EUR 0.202 million profit, which is the planned amount of profit, especially considering that 2014 ended in a loss of EUR 1.05 million,’ J. Skvarnovics explains. He admits that 2015 has been sort of a turning point for the company because until then the net sales declined rapidly for two years, in 2013 and 2014, which carried profit figures away with it and with the company ending up in the sector of losses. ‘The Riga Shipyard is recovering slowly, not fast, and it is not always possible to attain the intended objective fully,’says J.Skvarnovics. He refers to the experience of last year as a vivid example where a foreign customer delayed the building of a new ship. ‘At the Riga Shipyard, ships undergo repairs in outdoor docks, and the works are also affected by winter frost because the works cannot be carried out at the temperatures of 15-18C below zero, not to mention -20C or more,’ the company CEO illustrates the climate impact. He admits that the company had to face this problem, even if only for a few days in February.
Ship-building and repairs are related not only to the size of freight but they also depend on the funding available to shipping companies. ' It was in the news just recently that the transit flow through Latvia had dropped by 20% over three months this year, compared to a similar period last year, and this cannot leave shipping companies and their needs, both for the repairs of current ships and for placing new ship orders, unaffected' J. Skvarnovičs describes the situation. He also does not conceal the fact that this further exacerbates the competition between ship repair companies and companies building new ships in the Baltic Sea region. 'This market situation allows making a forecast that the Riga Shipyard revenue growth this year too will be just 5%,' J. Skvarnovičs replies to a question about the planned turnover this year. He believes that the proposed objective can be actually attained. 'There is no point in making forecasts that cannot be achieved realistically,' the Chairman of the Board says in reply to a question about the plan for this year.
Compared to 2015, this year a significant increase in the revenue is expected from building new ships, i.e. the Riga Shipyard has planned a budget of EUR 9.5 million, compared to EUR 4.7 million last year. 'We've already delivered one ship to the customer last week,' J. Skvarnovičs tells about the possibilities opening in the area of ship-building this year. He points out that an advance payment has been received and intensive work is currently under way for two projects for the building of coast guard technical service vessels for Swedish customers. 'It takes a long time to build a ship, about one and a half year, while in order to have something to build, one has to invest a lot of resources in working with the potential customers abroad, which means not only arranging for business trips and meetings but also developing and preparing a competitive offer ,' J.Skvarnovics says. He admits that the period of silence that the Riga Shipyard experienced specifically in the procurement of building new ships in 2012 caused a situation where there were nearly no orders to fulfil in 2014. 'All of these projects have a time lag measured in years,' J.Skvarnovics tells while describing the fight for securing ship-building orders and the actual ship-building schedule. He reminds that this year it is also planned to start building floating power plants (electricity is produced from sea swell) according to an order by a Finnish company.
'This year two Tallink ships have already undergone repairs at the the Riga Shipyard, and repairs are planned for another vessel owned by this shipping company in the autumn this year. Several other ships are currently undergoing repairs as well,' J. Skvarnovics says. He admits that, in an attempt to save money, ship owners are trying to delay ship repairs for as long as possible. However, the Riga Shipyard has taken certain measures enabling the company to carry out not only modernisation of vessels and installation of new engines but also works like extension of ships, development of technical designs for and production and installation of scrubbers (flue gas filters) and ship waste-water collection systems. An EU Directive has been adopted aiming to reduce ship-source pollution from waste-waters and flue gasses, therefore all ships will eventually have to be fitted with a waste-water collection system and flue gas filters. The Riga Shipyard competes with companies based in Tallinn, Klaipeda and Gdansk (also Gdynia). Customers are aware of the situation and want ship repairs to be carried out in line with quality standards within the shortest deadlines possible, with some additional bonuses thrown in by the repairers. 'At the Riga Shipyard, we're placing the emphasis on quality as well as efficiency, which enables making ship repairs as quickly as possible,' J. Skvarnovics says. While ship repairs result in a cash flow, one cannot talk about huge profits, however.
Janis Skvarnovics, Chairman of the Board of the Riga Shipyard: 'Compared to 2014, last year saw the Riga Shipyard making a marked step in the right direction since the company will end the year with a profit, as opposed to 2014 when the losses were in excess of EUR 1 million.'
Janis Skvarnovics
Chairman of the Board of Directors
of "Rigas kugu buvetava" JSC
t.+371 67353433