Thanks to having invested nearly €2m in its business last year and coming out as the successful bidder in several shipbuilding tenders, the JSC “Rigas kugu buvetava” (Riga Shipyard) has been able to achieve a profit of up to €0.97m.

‘This is a good result compared to a similar period last year when the gross profit was €0.33m, because such an increase is not that easy to achieve,’ says Mr. Janis Skvarnovics, Chairman of the Board of the Riga Shipyard, in assessing the situation. He points out that 2015 ended in a profit of €0.2m, compared to a year-end loss of €1.05 m reported in 2014, which is success in itself. It is interesting to note that the Riga Shipyard is one of the few companies operating in the metalworking and engineering industry that have managed to significantly increase their net sales in 2015. The turnover of the Riga Shipyard increased by nearly €4 m or 20% last year. ‘To the owners and corporate investors, it’s not the turnover but the net profit of the business that matter the most,’ says Mr. J.Skvarnovics in commenting the importance of turnover. He admits that companies operating in the sector of ship building and repairs not only feel the impact of geopolitical events but are also affected by the drop in commodity prices. ‘Orders for new ships are even more difficult to get than before, and ship owners are in no particular hurry to get their vessels repaired either, because this is not the best times for their businesses,’ the Chairman of the Board of the Riga Shipyard says in outlining the situation.

Despite the difficult situation described above, the revenues of the Riga Shipyard during the first six months of this year were €1m more than the revenues obtained over a similar period last year. Namely, the €2.73m of revenues obtained this year, as compared to the €1.71m last year, has been a huge leap in itself, according to Mr. J.Skvarnovics. ‘These are the first fruit of the work started last year towards securing orders for the building new ships; the plan for this year is worth €9.5m, and we still have to make a lot of effort to reach the target,’ J.Skvarnovics describes the situation. He notes, however, that this goal is realistic and can be achieved. ‘Orders for the construction of ship hulls mainly come from Nordic companies. It takes a long time, about 18 months, to build a ship; in order to have something to build, one must invest a lot of effort in relations with potential customers overseas: this includes not only business trips and meetings but also preparing and developing competitive offers on the part of the Riga Shipyard,’ says J.Skvarnovics. He admits that a period of silence in terms of tenders for the construction of new ships in 2012 resulted in a situation where the company had nearly no orders to work on during 2014. ‘All tenders have a time-lag of several years,’ Mr. J.Skvarnovics says in telling about the competition between companies for shipbuilding orders and the actual timetable for the completion of such works.

The situation appears to be quite different, when it comes to ship repairs. During the first six months of this year, the Riga Shipyard obtained €7.18m in revenues, which is €1.3m less than during a similar period last year when the revenues amounted to €8.43m. ‘Competition in ship repairs has become even fiercer, compared to the situation in 2015, as we have to compete for these orders not only with Polish companies but also with companies from Lithuania and Estonia, including service providers from more remote countries. Weather conditions early this year too prevented us from making ship repairs in the docks outdoors,’ says the Chairman of the Board of the Riga Shipyard. He quickly adds that certain measures have been taken, enabling the Riga Shipyard not only to carry out modernisation of ships and make repairs of new engines but also to carry out other works, such as extension of ships, development of technical designs for and production and installation of flue gas filters and ship wastewater collection systems. This is due to Directive 2005/35/EC aiming to reduce ship-source pollution from wastewaters, flue gasses, therefore all ships will eventually have to be fitted with a wastewater collection system, and flue gas filters.

Although the net turnover of the Riga Shipyard during the first 6 months of this year was €10.13m, which is slightly less than during a similar period last year (€10.24m), Mr. J.Skvarnovics notes that the planned net turnover of €25m has been achieved. ‘We expect the income from shipbuilding to grow in the next 6 months of this year, including income from ship repairs because the list of ships requiring maintenance in the next few months is quite full,’ says Mr. J.Skvarnovics in explaining the possibility for the growth in sales. He confirms that the €1.4m worth of investment in the business is also contributing to the return. ‘This year we’ve invested €0.3m in new equipment; still, one cannot do all at once because dockside cranes, docks, tug-boats and buildings need repairs too,’ says Mr. J.Skvarnovics. While not expecting a rapid growth, he points out, however, that he is not going to stop at whatever has been achieved.

The company needs new qualified professionals, therefore the Riga Shipyard currently serves as a place of apprenticeship for 8 fifth-year students of the Nikolayev National Shipbuilding University and 5 fourth-year students of the Odessa Maritime University. ‘Unfortunately, no shipbuilding and ship repair engineers necessary for the Riga Shipyard are currently being trained in Latvia, and there are no other ways for hiring them abroad. The Latvian Maritime Academy has signed a cooperation agreement with the Odessa Maritime University, and I hope that, as a result, training not only seamen but also shipbuilders and ship repairmen will become possible in Latvia,’ says J.Skvarnovics. He hopes that some of the trainees will be willing to stay in Latvia and work at the Riga Shipyard.

Mr. J.Skvarnovics, Chairman of the Board of the Riga Shipyard: ‘The profit of nearly €1m during the first six months of this year has been achieved thanks to orders placed with the Riga Shipyard for the construction of new ship hulls.’

         Janis Skvarnovics
         Chairman of the Board of Directors
         of "Rigas kugu buvetava" JSC
         t.+371 67353433