Boskalis solid despite ‘stormy conditions’

Larz Bourne
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Netherlands headquartered dredging and marine services giant Royal Boskalis Westminster N.V. has reported a net profit of €147.5m for the first half of this year despite difficult trading conditions.

Revenue in the first half of the year fell 25% compared to the first half of last year to €1.17 billion.

In the Dredging & Inland Infra segment revenue and the result declined as a result of weak market conditions and the completion of the Suez Canal project, which had made a substantial contribution last year. Fleet utilization was adversely affected by the suspension of work on the Pluit project in Indonesia. Results on projects in progress were reasonable to good. Offshore Energy managed to have a good first half of the year despite market conditions and the resulting lower revenue and fleet utilization.

At the end of the first half of the year the Boskalis order book, excluding shares in the order book of joint ventures and associated companies, stood at €2,697m, up slightly from the end of 2015.

Boskalis CEO Peter Berdowski said, "At the start of the year we indicated that we are experiencing stormy conditions. Falling prices of oil, gas and commodities are the dark clouds on the horizon that ultimately also affect late-cyclical companies such as Boskalis. The volume of work in the market has dropped significantly and a decline in revenue and the result is therefore inevitable.”

Looking forward, Boskalis sees that in a number of regions and markets where it is active trends are developing less favourably in the short and medium term, making the outlook uncertain. There is a reluctance to invest in major new ports and offshore-related projects. Despite slower growth in sea freight, demand for larger and deeper ports with the associated infrastructure to accommodate larger oceangoing and other vessels with deeper drafts provides opportunities. The greater focus on climate-related issues and ensuing opportunities in the field of offshore wind farm projects has created a sizable growth market with interesting projects.

Global population growth ensures structural demand for Boskalis’ land reclamation and infrastructure activities. Climate change is forcing governments on several continents to take steps to protect their populations against flooding and rising sea levels. The result of this is a structural demand for integrated sustainable solutions.

The general market outlook for the coming period is expected to continue to be characterized by lower volumes of work and pressure on utilization rates and margins. At Dredging & Inland Infra the emphasis is on safeguarding utilization rates at responsible levels of project risk.

The fleet rationalization program will be implemented in the next two years and will involve 24 vessels being taken out of service, including 10 from the dredging division. Based on the fleet planning and work in the order book, and subject to unforeseen circumstances, the Board of Management expects the level of operating net profit in the second half of 2016 to approach the level achieved in the first half of the year.

Capital expenditure is expected to be approximately €200m in 2016, excluding acquisitions, and will be financed from the company's own cash flow. Boskalis has a very sound financial position and the solvency ratio has increased further to over 60%.

By Larz Bourne

Global population growth ensures structural demand for Boskalis’ land reclamation and infrastructure activities