Investment, Industry and IT Minister Austin Gatt, in his usual style, did not mince his words during the press conference held earlier this week to announce the financial results for Malta Shipyards for 2005.
The company, restructured a few years ago in a bid to enable it to survive after several years of difficulty, has greatly improved its results since. But there is still a long way to go for the company to turn the corner and reach established targets.
Last year, the company’s losses amounted to Lm8.8 million, which is less than the losses incurred some years back before the restructuring process, but still a hefty sum indeed.
What is preoccupying is that this loss was registered when the company’s turnover exceeded expectations and reached nearly Lm20 million – Lm3 million more than a year earlier – and it is for this reason that Minister Gatt sounded a warning signal.
He explained that the shipyard’s net losses should have been a million liri or so less – Lm7.7 million instead of Lm8.8 million – adding that Malta Shipyards has to make a greater effort to change its entrenched work practices and to increase its productivity levels if it is to turn the situation around by the end of 2008.
It is in this context that Dr Gatt made his statement on the future of the company. “If the company does not meet its targets by the end of 2008, there is not one lira left in subsidies to be paid out by the government.”
It must be recalled that since the restructuring process started in 2001, the Shipyards have already eaten up Lm60 million in subsidies, not to mention the Lm300 million in debts that were written off by the government when the Drydocks made way for Malta Shipyards.
If matters do not improve, “the company will either have to cut its payroll cost or consider redundancies,” the minister pointed out. He could not have made a clearer statement.
The crux of the problem is the work practices that, according to the minister, need to be changed to make the company more efficient.
While the company must continue to strive to increase its revenue – and Malta Shipyards managed this quite well in 2005 – a stronger effort must be made to reduce costs. Otherwise, additional income would be “futile” if it is taken away in expenses.
A few days before the press conference was held, Malta Shipyards announced that it had won two major contracts – a Lm3 million contract to upgrade an FPSO vessel and a Lm7 million contract for the conversion of a heavy lift barge. The work will be carried out over the next few months.
This means that the Shipyards are attracting work and have also managed to diversify business that is not strictly related to ship-repair. When announcing the Lm7 million contract two weeks ago, the Shipyards had said in its statement that “the work will provide the turnover necessary for 2006”.
But it is still to be seen as to whether losses will be cut and whether these cuts would be sufficient to bring the Shipyards more in line with the targets that have been set.
And this is where productivity comes in. Malta Shipyards chairman John Cassar White made it clear that there must be a concerted effort to improve the company’s efficiency in terms of productivity “or else face the consequences”.
If the target to reduce the losses to Lm1.8 million by 2008 is not met, the company would have no other option but to implement other measures which it is working hard to avoid.