Why latest profit guidance on Vard Holdings is pessimistic

2Q2013 performance likely to disappoint.

According to OCBC Investment Research, Vard Holdings warned that its 2Q2013 financial results are likely to be below current consensus estimates due to difficulties in its operations in Brazil.

"The group had previously guided that its Brazil operations are coming under control and would stabilize by year-end. However, after a recent assessment, management found further delays, cost over-runs at its Niteroi yard due to lower-than-expected productivity, additional costs for outsourcing and higher start-up costs at the Promar yard," the research firm said.

"These issues have adversely impacted its 2Q margin. Operations elsewhere are stable and Vard Holdings as a group remains profitable," it added.

"Our FY13F net profit estimate is 6% below consensus, but we would likely revise lower after speaking with management later to get more colour," it said further.

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