Vow ASA – Q3 trading update: inflation and increased cost in supply chain result in loss in the quarter

Vow continues to steadily grow its business. Revenues in the first nine months this year was NOK 703.5 million, up 18.5 percent from NOK 593.6 million in the same period last year. The growth is a result of increased demand for the company’s technology from customers across a wide range of industries.

The relevance and attractiveness of its solutions is clearly visible in the company’s order backlog, which was NOK 1.1 billion at the end of September 2023 and all of Vow’s main markets remain strong. In addition to the firm backlog, shipowners have placed options on the newbuild series being equipped with
Scanship systems amounting to NOK 932 million in likely future revenues related to the Maritime Solutions segment.

“We have for a long time been very busy delivering large projects, and we are of course proud that we have been able to deliver to our customers on time. But we are also deeply regretful for having to inform about such significant one-time effects on our margins,” said Henrik Badin, CEO of Vow ASA.

“In the same period, we have strengthened the capacity and quality of the organisation. We have finalised the implementation of a new ERP system which is giving us better visibility and control. I am particularly grateful for having Tina Tønnessen onboard as new Chief Financial Officer since May this year.
Together with her team, she has been instrumental in this work,” Henrik Badin added.

Positive outlook

The review of the project portfolio confirmed that all projects are progressing well. Some contracts with subcontractors have already been renegotiated to better terms, and that the quality of the company’s order backlog is good. Other margin improvement initiatives have also been identified, and are currently in the process of being implemented.

Revenues for the full year 2023 is forecasted to exceed NOK 900 million, and the EBITDA margin for the full year is estimated at 2-4 percent, including the negative effect in the third quarter.

Vow’s current backlog holds potential for significant cash flow going forward owing to the strong demand from customers in multiple industries, and the company is currently actively bidding and positioning for major contracts in cruise, and circular solutions for end-of-life tires, sewage sludge, metallurgy, and renewable energy. Securing new orders while at the same time maintaining healthy margins will be imperative going forward.

The company’s financial position remains strong, with available liquidity for the group amounting to NOK 72 million at the end of September 2023.

Vow Group (Amounts in NOK million) Q3 23 Q3 22 YTD 23 YTD 22 2022
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Revenues 254.6 193.7 703.5 593.6 782.8

EBITDA before non-recurring items -15.5 25.1 14.1 78.4 92.2

EBITDA before non-recurring items margin -6.1% 12.9% 2.0% 13.2% 11.8%
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Order backlog 1 095 1 326 1 095 1 326 1 190
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Business segment information

Industrial Solutions (Amounts in NOK million) Q3 23 Q3 22 YTD 23 YTD 22 2022
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Revenues 110.7 78.9 258.4 262.4 304.3

EBITDA before non-recurring items 2.7 11.9 2.2 36.7 37.7

EBITDA before non-recurring items margin 2.4% 15.1% 0.9% 14.0% 12.4%
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Order backlog 535 488 535 488 441
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As expected, Industrial Solutions secured several key contracts and work orders in the third quarter. The Rhode Island project is well underway and delivered positive gross margins in the third quarter. Further, an expansion of the Follum project was awarded by Vow Green Metals. As a result, revenue has increased in the quarter. The margin has started to improve compared to the previous quarter, which was impacted by capacity costs, and is forecast to continue to improve.

Demand for Vow circular and low carbon technologies and solutions is strong, as evidenced for instance by the front-end-engineering design (FEED) agreement for a major international pyrolysis project announced in September. Vow has also seen strong interest and several contracts awarded by heat intensive industry for CHE technology for electrification, heat exchange and heat recovery solutions.

Maritime Solutions (Amounts in NOK million) Q3 23 Q3 22 YTD 23 YTD 22 2022
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Revenues 94.3 82.4 308.0 249.6 358.6

EBITDA -15.1 18.1 28.5 58.4 76.9

EBITDA margin -16.0% 22.0% 9.2% 23.4% 21.4%
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Order backlog 560 839 560 839 749
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Maritime Solutions continued to deliver a strong topline, driven by high activity and completion of projects. The EBITDA result was heavily impacted by the one-time effect mentioned above. For full-year 2023, the EBITDA margin is expected to be slightly above the margin year-to-date.

Reports and remarks by the large cruise operators indicate that this industry has recovered fully from the 2020-21 shutdown, and that the operators are contemplating investments in fleet renewals and expansion to meet expected increase in number of passengers. Vow’s current backlog in this segment includes confirmed contracts to 2029, and tendering activity is high.

Aftersales (Amounts in NOK million) Q3 23 Q3 22 YTD 23 YTD 22 2022
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Revenues 49.6 32.4 136.6 81.6 119.9

EBITDA 5.7 3.6 18.7 8.0 14.0

EBITDA margin 11.4% 11.2% 13.7% 9.9% 11.7%
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Activity in the Aftersales business is closely correlated with the number of cruise ships in operation. Revenues and EBITDA are expected to remain steady through the remainder of the year.