Very busy first half year with historically high profit for tugboat operator/dredging company Boskalis

by Hans | August 20th, 2015

Highlights of first half 2015

  • Revenue: EUR 1.6 billion
  • EBITDA: EUR 500 million
  • Net profit: EUR 307 million
  • Order book: EUR 3.0 billion 

outlooK 2015

  • Dredging: stable market with lower utilization rate in the second half year, partly due to postponed vessel maintenance from the first half
  • Offshore Energy: more challenging circumstances, particularly in the capacity-driven short-term markets
  • Towage: stable market prospects
  • Net profit outlook: FY 2015 net profit lower than 2014 record of EUR 490 million
Royal Boskalis Westminster N.V. (Boskalis) realized a net profit of EUR 306.5 million in the first half of 2015, a rise of 21% (H1 2014: EUR 253.0 million).
 
Revenue in the first half of the year rose 1.6% to EUR 1.57 billion (H1 2014: EUR 1.55 billion). Adjusted for (de)consolidation and currency translation effects, revenue was stable.
 
EBITDA in the first half of the year amounted to EUR 500.1 million (H1 2014: EUR 466.4 million) and the operating profit (EBIT) was EUR 359.3 million (H1 2014: EUR 338.3 million).
 
Results in all three segments were good in addition to which there were a number of (positive) exceptional items.
 
Dredging & Inland Infra had an exceptionally busy first half from an operational point of view. Good results on the projects in progress, a very high fleet utilization rate together with relatively low repair costs and a substantial contribution from financial settlements on projects completed earlier all contributed to the good result.
 
Offshore Energy also had a good first half year with high utilization of the equipment and good project results. In addition, the stronger US dollar made a positive contribution to the result.
 
At Towage & Salvage the result of the harbor towage activities was in line with expectations, but the result of Smit Lamnalco lagged behind. Salvage had a good first half with various wreck removal projects and a substantial contribution to the result from the financial settlement from salvage projects executed in previous years.
 
During the first half Boskalis increased its stake in Fugro N.V. by 5.2% to 25.1%. In accordance with IFRS this stake is recognized as an associated company as from 2015. Consequently, a positive revaluation result of EUR 28.5 million on the stake in Fugro is recognized in the Holding segment.
 
At the end of the first half of the year the order book stood at EUR 2,963 million (end-2014: EUR 3,286 million). The decline in the order book is mainly attributable to the execution of the sizable Suez Canal project and the sale of the activities of De Jong at the beginning of the year.
 
Peter Berdowski, CEO Boskalis:
 
"Once again we can look back on a fantastic first half of the year with historically high EBITDA of half a billion euros.
We are especially proud of the successful execution and swift realization of the Suez Canal project, which was on an unprecedented scale and had to be completed within an extremely short timeframe. Partly due to the Suez project the dredging fleet was kept busy plying the waterways in the first half of the year. The high fleet utilization made a strong contribution to the good result. The second half of the year will be a different story in terms of utilization in particular because we will have to catch up on vessel maintenance which will result in more expenses and less revenue.
We also had a good first half in offshore, partly helped by the strong US dollar. The nature of our activities means that we are largely late-cyclical in offshore and thanks to our order book we were able to keep fleet utilization levels high. Nevertheless we too are increasingly experiencing volume and margin pressure in the short-term, capacity-driven activities.
We expect a prolonged period of low energy prices and lean market conditions in the offshore oil and gas market, and are therefore tightening things up where necessary in terms of organization, fleet composition and capital expenditure."

Market developments
Boskalis responds to various global macro trends by providing creative and innovative all-round solutions in specific market segments. These trends include growth in the world's population and prosperity, which in turn leads to increasing global trade and energy consumption. In addition there are the irreversible effects of climate change. The extent to which these macro trends will continue to develop in the coming years will be strongly dependent on geopolitical stability and macroeconomic growth in particular. Positive investment decisions in relation to large maritime infrastructure projects, which generate a lot of work for Boskalis, are closely linked to this.
 
We see a stable market with regard to large-scale maritime infrastructure projects, the developments in and around ports and large-scale infrastructure works in the Netherlands. The tender pipeline with capital dredging projects for the deepening and expansion of ports and waterways, land reclamation projects and tunnel developments is positive, and maintenance work in these markets has a strong recurring nature. In large ports the development of the number of shipping movements and thus the demand for towage services looks likely to be stable in the coming years. In light of this, expectations are that conditions in the Dredging & Inland Infra and Towage segments will remain stable.
 
In the offshore energy market there is a clear distinction between short and long-term developments. At present the short term is strongly affected by the low oil price, which is causing oil majors to postpone investment decisions relating to complex and costly offshore projects. In the long term, however, the demand for energy will continue to be driven by increasing prosperity and economic growth.
 
In the near term, those activities aimed at the capacity-driven spot markets such as Marine and Subsea Services are expected to be impacted hardest. The picture at Marine Contracting and Subsea Contracting is more favorable, fueled by structural developments in offshore wind energy, the dismantling of old oil and gas rigs and new developments in the Middle East and surrounding LNG, such as in Western Canada.
 
Boskalis expects to see a prolonged period of low energy prices and lean market conditions in the offshore oil and gas market and is tightening things up where necessary in terms of organization, fleet composition and capital expenditure.

Outlook
Current information suggests that no major changes are to be expected in the market environment for Dredging & Inland Infra and Towage in the second half of the year compared to the first half. Following an exceptionally busy first half year at Dredging, fleet utilization levels will come down in the second half, partly due to postponed vessel maintenance from the first half year. This will result in a lower operating margin.
 
The outlook for Offshore Energy remains mixed. Long-term contracts and work already contracted are expected to provide an important degree of stability well into 2016, but the short-term related transport activities and subsea services are experiencing pressure on utilization levels and margins.
 
Across the portfolio it remains crucial that we make every possible effort to maintain the level of the order book, whereby we are selective in taking on projects, with an acceptable risk profile.
 
Based on the fleet schedule and work in the portfolio and barring unforeseen circumstances, the Board of Management expects a good second half of the year. Net profit for the full year 2015, including our stake in the result of joint ventures and associated companies, is not expected to approach the 2014 record result (EUR 490 million).
 
The 2015 capital expenditure is expected to amount to EUR 225-250 million (from EUR 250-275 million), which will be financed from the company's own cash flow.

The full report can be read here

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