Royal Boskalis Westminster N.V. (Boskalis) achieved a net profit of EUR 150 million in 2017, in line with expectations. This compares to a net loss of EUR 564 million in 2016 as a result of EUR 840 million of non-cash impairment charges.
Revenue declined by 10 per cent to EUR 2.34 billion (2016: EUR 2.60 billion). Adjusted for consolidation, deconsolidation and currency effects, revenue was down 15 per cent.
EBITDA amounted to EUR 437 million and the operating result (EBIT) was EUR 185 million (2016 EBITDA: EUR 661 million and EBIT: EUR 385 million, both adjusted for impairment charges).
Dredging & Inland Infra had a relatively busy year after an exceptionally weak 2016. Both revenue and the fleet utilization rose, fueled by a number of large projects in progress in Brazil, Indonesia, India and Oman. The results from ongoing dredging projects were lower than in previous years while projects that were technically completed previously once again made a positive contribution to the result.
Revenue and the segment result at Offshore Energy declined further compared to previous years, due in part to the poor market conditions in the oil and gas industry. The various activities nevertheless made a reasonable to good contribution to the result.
The result at Towage & Salvage declined compared to last year, mainly as a result of weak market conditions and one-off charges at Towage. Following a very quiet start to the year, Salvage ended 2017 well with a couple of large emergency response contracts.
Boskalis’ financial position remains strong with a solvency ratio of 63% and a limited net debt of EUR 120 million.
The order book increased to EUR 3.50 billion (end-2016: EUR 2.92 billion).
Peter Berdowski, CEO of Boskalis:
“Despite the difficult market conditions we ended the year quite reasonably, in line with our expectations. Furthermore, in the first year good progress was achieved with the implementation of our 2017-2019 corporate business. This included the acquisition of Gardline, a renowned British player in the marine survey market, in which we aim to build a presence. In addition, we added two modern diving support vessels to our fleet, considerably strengthening our position in the subsea services market. And very recently we took the Bokalift 1 into service, an impressive crane vessel for the offshore installation market, both for oil and gas and for offshore windfarm projects. The vessel’s first project involves the installation of jackets for an offshore windfarm.
In the past period we also adjusted our fleet and organization to the changed market conditions. Following the fleet rationalization program, we optimized the organization at head office in 2017. We made a conscious decision to do this within a short timeframe allowing us to now look ahead at the opportunities still present in the market. To capitalize on these opportunities as one team, we will present ourselves in the market with one face and will therefore in 2018 transition to one strong brand name: Boskalis.
As stated in our corporate business plan we do not yet foresee a fundamental recovery in our markets in the coming years. In the short term we do however expect opportunities for selective growth and a subsequent structural recovery for the period thereafter.”
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Market developments & Strategy update
The long-term macro trends that underpin the Boskalis business model remain positive. Our business drivers are structural economic growth and increasing prosperity of the global population, which in turn fuel growth in global trade and demand for raw materials and energy. Global warming also continues to create business opportunities for Boskalis due to the growing need for coastal defense and riverbank protection as extreme weather conditions lead to increased flooding. While the long-term trends are positive, in the short term these are not translating into promising projects across the board. Demand in some of the regions and markets where Boskalis is active is expected to develop less favorably in the coming years and the outlook is uncertain. Boskalis will continue to focus on market segments that show long-term structural growth and provide short-term opportunities: ports, energy (oil, gas, wind and the dismantling of old offshore platforms) and climate change-related projects (coastal defense and riverbank protection).
The Corporate Business Plan for 2017-2019 and the strategy section in the 2017 Annual Report take a detailed look at the development of our business drivers and how these translate into our end markets. We see plenty of scope to further expand the business and acted upon this in the past year. In 2017 Boskalis strengthened its position in Subsea Services with the acquisition of marine survey specialist Gardline and the addition of two modern high-end SAT diving support vessels. Our position in the offshore installation market was recently strengthened with the commissioning of the Bokalift 1, a 3,000-ton crane vessel. This multifunctional crane vessel that transports and installs foundations for offshore windfarms and oil and gas platforms will also be used to dismantle old platforms and salvage ship wrecks. In 2017, the Dredging fleet was further strengthened with the new mega cutter suction dredger Helios, with a sister vessel expected to be taken into service in 2020. Despite facing short-term challenges Boskalis is positive about the opportunities in the medium term and long term.
As stated in our corporate business plan the market picture for the next two years will be characterized by continued lower volumes of work and pressure on both utilization levels and margins. At Dredging & Inland Infra we see a reasonable volume of work in the market in the short term. The emphasis for Boskalis is on maintaining utilization at a responsible level of project risk. The current size of the order book means that a good part of the fleet will be utilized in 2018, albeit at lower margins than in previous years. The picture for the Offshore Energy market has not changed. Past contracts at Heavy Marine Transport are being completed and we are increasingly dependent on the highly competitive spot market. Where necessary transport vessels at the lower end of the market will be laid up. At Offshore Installation & Intervention the order book is filled better and we expect a reasonable year. Market volumes in the Towage activities are relatively stable, although competition in some ports has increased, resulting in lower margins.
The project-based nature of a significant part of our activities, in addition to the uncertain market conditions, makes it difficult to provide a specific quantitative forecast with regard to the 2018 full-year result early on in the year. However, knowing what we know now it appears that it will be a challenge to match the 2017 net result.
Capital expenditure in 2018 is expected to be around EUR 250 million, excluding acquisitions, and will be financed from the company’s own cash flow. Boskalis has a very sound financial position and comfortably meets its financial covenants.
Image credit: Boskalis
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