Lamprell posts $47m loss, sending shares down

A Lamprell shipyard in Jebel Ali. The company has been hit by losses on two problem rigs under construction at the yard. Jaime Puebla / The National

Lamprell, an oilrig builder based in Dubai, is in danger of breaching the terms of agreements with its lenders after difficulties delivering orders.

The company, which has until December to renegotiate its banking covenants, yesterday reported a net loss of US$47.1 million (Dh172.9m) on revenues of $528.1m from the first half of this year. Lamprell, which is listed in London, also eliminated its dividend after offering investors 4 cents per share last year.

The shares fell as low as 3.9 per cent before paring losses to close at 89.75 pence yesterday in London. The stock has lost 66.5 per cent of its value since the start of the year.

"Changes are being introduced across the business, which include management re-organisation and the implementation of improved processes, systems and controls," said Nigel McCue, the Lamprell chief executive.

Most of the company's losses were blamed on engineering difficulties and construction delays on a contract to build two wind turbine installation vessels at its shipyard in Jebel Ali. Lamprell said it also faced supply chain delays building jack-up drilling rigs at a shipyard in Hamriyah in Sharjah and predicted a full-year loss of as much as $17m.

However, Mr McCue said Lamprell's order book stood at a "historically high" level of $1.5 billion and that the company was introducing new systems and reorganising management to bring itself back to profitability.

Lenders granted Lamprell waivers for banking covenants in June and this month. The company now has until December to renegotiate the terms of its loans or face having to pay back the full amount immediately.

"There are a number of issues that the management has got to address before the shares will find faith again with all investors," said Andrew Whittock, an analyst at Liberum Capital in London. "Given the likely cash position at the end of the year and given the cash flow that we expect to be generated in the second half, I don't think that the covenants will be an issue."

A year ago Lamprell bought MIS, an oilrig and vessel-making competitor based in Sharjah. The merger was expected to bring Lamprell greater access to markets in Asia and additional technical expertise.

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