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Gerald Fenech
Posting a net loss of Lm 9.3 million for the financial year ending in 2006, Malta Shipyards appears to be heading for imminent crisis as the rescue plan ends in December 2008, practically a year and a half from now.
An analysis of the results announced by CEO Chris Bell on Friday reveals that while turnover has gone up by almost 20 per cent from 2005, losses posted where almost Lm 600,000 more than the Lm 8.7 million registered in that year. This is chiefly due to the extremely high cost of sales which jumped from Lm 13.6 to Lm 20.1 million with gross profit also taking a downward slide from Lm 6.2 to 5 million.
This is the first time since 2003 that losses have veered considerably off projections. In 2002 and 2003, the shipyards posted massive Lm 23 and Lm 19.7 million losses against projections of Lm 19.9 and Lm 10.8 million respectively. Losses were Lm 9.5 million in 2004 dropping to Lm 8.7 million in 2005, better than projections of Lm 10.1 and 8.8 million whilst this year, the losses were over 35 per cent off the mark indicating that time is running out.
The key problem appears to be productivity, which has actually decreased and not increased since 2004. In fact, although turnover more than doubled from Lm 10.3 to Lm 21.6 million, the resulting labour selling rate (productivity) went down from a factor of 6.88 in 2004 to 5.34 in 2006. The effective labour cost rate increased from Lm 3.35 to Lm 3.65 whilst the mark up on labour or value added went down from 206 per cent to 146 per cent in three years.
Apart from productivity, the reasons for failure to reach targets include unacceptable time-keeping, ineffective supervision, over-allocation of employees and an excessively high “re-work” element. If things are not improved then a cash flow crisis will occur, resulting in the non-payment of wages together with a breach of EU commitments which will eventually lead to investigations. |
