Posted on November 15, 2022
Morgan City, La., headquartered shipbuilder Conrad Industries, Inc. (OTC Pink: CNRD) has reported its third quarter and nine months 2022 financial results and backlog at September 30, 2022.
For the quarter ended September 30, 2022, Conrad had a net loss of $5.3 million and loss per diluted share of $1.06 compared to net loss of $578,000 and loss per diluted share of $0.12 during the third quarter of 2021. The company had net loss of $8.8 million and loss per diluted share of $1.75 for the nine months ended September 30, 2022 compared to net income of $8.7 million and earnings per diluted share of $1.74 for the nine months ended September 30, 2021.
Net income for the first nine months of 2021 included the company’s Paycheck Protection Program loan being forgiven in the second quarter of 2021 and its qualification for the Employee Retention Credit for the first three quarters of 2021.
HIGHEST BACKLOG IN COMPANY HISTORY
During the first nine months of 2022, Conrad added $251.0 million of backlog to its new construction segment compared to $80.3 million added to backlog during the first nine months of 2021. Conrad’s backlog was $260.5 million at September 30, 2022, the highest backlog in our company’s history, compared to $148.5 million at December 31, 2021 and $163.5 million at September 30, 2021.
In its full OTC markets filing, Conrad notes that its results for the nine months ended September 30, 2022 “reflect a continued challenging operating environment, including challenges associated with the COVID-19 pandemic, continued high steel prices, inflationary price increases in other materials and equipment, supply chain disruptions and a tight labor market resulting in difficulties in retaining and hiring direct labor. In response, in February 2022, we significantly increased our hourly labor rates. In new construction, we continue to experience a soft market particularly for energy transportation projects and projects related to the offshore oil and gas industry; however, demand in the infrastructure and government markets helped offset a portion of the adverse impact.
“We believe that, largely as a result of the pandemic and rising steel prices, and to a lesser extent due to uncertainties caused by rising interest rates during 2022, many new construction customers have delayed new orders. The repair market also continues to be adversely affected by depressed Gulf of Mexico activity and uncertainty in the marketplace; however, profitable jobs in the infrastructure market enhanced our results in our repair and conversion segment and helped offset some of the adverse impact. We continue to experience pricing pressure in both segments, which has intensified due to the pandemic and high steel prices. These factors negatively impacted our results for 2021 and have continued to negatively impact our financial performance throughout 2022.
STEEL PRICES
“In late 2020 and throughout 2021, steel prices increased sharply, primarily due to supply issues caused by COVID-19 pandemic. While steel prices appeared to be softening in the beginning of 2022, the Russian invasion of Ukraine beginning on February 24, 2022 drove steel prices higher. We have recently begun to see some moderation of steel prices. However, much uncertainty exists regarding future steel availability and prices due to supply issues caused by the COVID-19 pandemic, relatively low inventory levels, the war in Ukraine and the overall inflationary environment. While we have steel price escalation provisions in many of our new construction contracts, the contracts typically do not protect us from price increases in other materials and in labor.”
“Although we face substantial uncertainties in our markets, we believe we are well-positioned to take advantage of opportunities when market fundamentals improve,” says the company. “We believe customers have delayed orders due to high steel prices and pandemic uncertainties, and to a lesser extent rising interest rates, and that some of these orders will move forward when steel prices decline, interest rates stabilize, or our customers’ business opportunities or fleet replacement needs require the vessels. We have seen a continued strong market for dredging and other infrastructure-related vessels, which we expect may continue, supported by the Infrastructure Investment and Jobs Act enacted in 2021.
“In fact, as described further below, during the first nine months of 2022 we were awarded new contracts totaling approximately $251.0 million, and as of September 30, 2022, our backlog was $260.5 million, the highest backlog in our company’s history. We are also exploring projects in the offshore wind industry particularly as it moves into the Gulf of Mexico. We are also optimistic about opportunities in our repair and conversions segment.”
