Features

Asry’s rig repair work is upgrading rig assets to Saudi Aramco’s Schedule G standards

Asry’s rig repair work is upgrading rig assets to Saudi Aramco’s Schedule G standards



Asry clocks modest growth in 2018

The ongoing financial and organisational restructuring is addressing the cumulative build-up of costs, with many positive strides made, and still more to make, Asry CEO Andy Shaw tells Pummy Kaul

January 2019

After a turbulent couple of years, Bahrain-based Arab Shipbuilding & Repair Yard (Asry), the Arabian Gulf’s leading maritime repair and fabrication facility, has made positive progress in the year 2018 with its economic and operational conditions stabilising following a financial and organisational restructuring.

“2018 has seen a stabilisation of the company in 2018 after a turbulent couple of years. For contracting companies such as Asry, the perpetual challenge of balancing the cost base with the fluctuating market conditions is as prevalent as ever. Prior to 2016, costs had grown to an unsustainable level, creating an imbalance. The ongoing financial and organisational restructuring is addressing that cumulative build-up of costs, with many positive strides made, and still more to make,” says Asry CEO Andy Shaw.

In an exclusive interview with Gulf Industry, Shaw further says that Asry has continued to stabilise as revenue targets that were set last year have been met. “In 2018, Asry’s sales position has been almost exactly on target, which we set ourselves last year, and represents a modest growth from 2017, which considering market conditions and our competitors performance is an encouraging result,” Shaw said. Excerpts from the interview:

 

What have been the major highlights and milestones at Asry in 2018?

2018 has seen a stabilisation of the company after a turbulent couple of years. For contracting companies such as Asry, the perpetual challenge of balancing the cost base with the fluctuating market conditions is as prevalent as ever. Prior to 2016, costs had grown to an unsustainable level, creating an imbalance. The ongoing financial and organisational restructuring is addressing that cumulative build-up of costs, with many positive strides made, and still more to make.

Shaw: positive outlook

Shaw: positive outlook

The Kingdom of Bahrain, through its sovereign wealth fund, is now the significant majority shareholder in the company, which has helped clarify the company’s mandate going forward to be a sustainable employer for generations to come. To that end, many non-commercial initiatives have seen strong progress, such as the safety record of the yard achieving a 73 per cent improvement from January 2017 through 2018, and an organisational restructuring see the headcount reduce significantly since 2016 and over $14 million annual savings achieved.

The most important milestone was the announcement of a new Fabrication & Engineering focus. This new service – which provides modular fabrication, steel structures, piping solutions, offshore structures and vessel construction – is the fourth pillar in the company’s newly defined core services. The multi-service yard now includes four core services, defined as Ship Repair & Conversion, Rig Repair & Conversion, Naval Repair & Conversion, as well as Fabrication & Engineering.  

 

What prospects do you see in Bahrain and the region for your new Fabrication and Engineering division?

At first we are focusing on Bahrain-based projects, and have already been in extensive talks with national operators such as Noga, Bapco and Banagas to share with them how Asry’s expertise lends itself ideally to their upcoming engineering, fabrication and construction needs. It is a natural progression for Asry. The essential elements – steel work, piping work, mechanical work, etc – are already part of Asry’s DNA as they are key elements in our ship and rig repair business. Now we are deploying those years of expertise as their own independent revenue stream. Over the past 40 years, Asry has established itself as a leader in maritime repair, and now there is an opportunity to establish ourselves as the leader in the engineering and construction sector in the Arabian Gulf.

 

What percentage contributions to the total sales turnover is Asry expecting from the newly launched Fabrication & Engineering and other divisions?

The five-year target split between the four divisions is for Ship Repair & Conversion to contribute 30 per cent of revenues, Rig Repair & Conversion to contribute 30 per cent of revenues, Naval Repair to contribute 20 per cent of revenues and Fabrication and Construction to contribute 20 per cent of revenues.

 

In terms of ship repairs, how many vessels did Asry repair in 2018, and which were the most extensive ones?

Asry: aiming to be the leader in the engineering and construction sector

Asry: aiming to be the leader in the engineering and construction sector

Up to the end of November 2018, we had completed 136 ship repair projects, which predicts a higher total in 2018 than 2017’s 140. Until date, the Arabian Gulf market is proving to be the more significant contributor to revenues, with approximately 71 per cent of ship repair work coming from regional projects. Bahrain, Saudi Arabia, and then the UAE are the top sources of that income, in order of value. The major clients who are entrusting their fleet maintenance to Asry in 2018 include United Arab Chemical Carriers (UACC) from Dubai, Bahri from Saudi Arabia, National Petroleum Construction Company (NPCC) from Abu Dhabi, and Arab Maritime Petroleum Transport Company (AMPTC) – four of the largest vessel owners in the region.

Aggressive competition in the ship repair industry is believed to have brought margins down across the sector dramatically. What are the revenues expectations from ship repair activities in 2018, and what is the average repair spend per vessel?

We have seen the average spend per vessel decrease approximately 10 per cent with projects we completed, although it’s interesting to note that it is in our international market where we’ve seen the largest falls. Global clients spent 29 per cent less on each project on average in 2018 than 2017, however clients from the region actually spent 2 per cent more per project on average with us compared with 2017. We have anticipated this shift and adjusted our marketing approach this year to mitigate as much of the margin fluctuation as possible to maintain revenue stability.

 

What are your expectations for the Saudi share in total sales in 2018? What could be the reasons for the Saudi share increasing or decreasing?

In 2017, the percentage of ship repair project sales from Saudi Arabia was approximately 11 per cent, and 2018 will likely follow a similar pattern. However many of our projects our related to Saudi Arabian clients, if not directly booked by them. Saudi Aramco is very influential over our business due to the majority of our rig clients being contracted by them. For example, much of Asry’s rig repair work in 2018 is upgrading rig assets to Saudi Aramco’s Schedule G standards.

 

What significant challenges is the offshore services market facing today and what is Asry’s response to them? What measures have been rolled out by Asry in 2018 and what will be adopted in 2019?

The rig business has accelerated through the year, with delays in re-activations of rigs making the first quarter slower than expected, and exceeding our expectations in the third quarter. Overall, however, Asry remains the preferred destination for operators to get their assets compliant with Saudi Aramco’s standards, particularly Schedule G. We’ve completed 13 rig projects in 2018 with several still underway, as compared to a total of 16 in 2017, and revenues have increased which reflects a more buoyant attitude amongst our clients.    

 

What focus will Asry have in 2019? Where does it expect to see strong growth?

Now that Asry has defined its four core Services, the strategy for each one is unique. In the Ship Repair & Conversion division, the focus will be to continue to consolidate the excellent relationships we have with regional clients as their repair yard of choice, while also maintaining constant contact with the international market on a territory-by-territory basis.

On the Rig Repair & Conversion side, Asry will continue to leverage the fact that it is now the most experienced yard for Saudi Aramco-compliant upgrades and conversions to attract regional operators. Naval Repair & Conversion will be targeting the three major defence sector presences in the region – US Navy, Royal Bahrain Naval Forces, and the UK’s Royal Navy, whose presence in Bahrain is also growing.

More immediately, however, there will be a strong emphasis on Fabrication & Engineering work, which is a natural progression for Asry. Combined, these four core services will provide revenue mix that will not only diversified enough to provide robust mitigation of various market cycles, but also buoyant enough to see growth in the coming years.




More Stories



Tags