Royal Boskalis Westminster N.V. achieved an operating net profit of EUR 276 million in 2016, in line with expectations. Including non-cash impairment charges of EUR 840 million after tax the company reported a net loss of EUR 564 million (2015: net profit of EUR 440 million).
Revenue declined by 20 per cent to EUR 2.60 billion (2015: EUR 3.24 billion). Adjusted for consolidation, deconsolidation and currency effects, revenue was down 26 per cent.
EBITDA amounted to EUR 660 million and the operating result was EUR 385 million, both adjusted for impairment charges (2015 EBITDA: EUR 885 million and operating result: EUR 577 million).
Given that 2015 was still an exceptionally good year with strong fleet utilization rates and outstanding project margins the transition to and contrast with 2016 was equally exceptionally large.
Dredging & Inland Infra had a quiet year. The sharp decline in revenue was partly due to a very busy 2015 with the execution of the Suez Canal project, but also reflects the conditions in the market. Moreover, revenue and fleet utilization were negatively impacted by the suspension of work on the Pluit project in Indonesia. The results on projects in progress were reasonable.
Revenue rose at Offshore Energy due to the addition of the offshore activities acquired from VolkerWessels. These activities also made a good contribution to the result. The remaining activities made a reasonable to good contribution despite the deteriorated market conditions.
Towage & Salvage reported a lower result compared to the previous year, partly as a result of deconsolidation effects at Towage. Salvage had a good but very quiet year.
In light of the strongly deteriorated conditions in the offshore market and the resulting outlook we recently announced non-cash impairment charges of EUR 840 million after tax. These charges pertain almost entirely to the service-related part of Boskalis’ offshore oil and gas activities and relate to the impairment of both vessels and goodwill.
Boskalis’ financial position continues to be strong, even after the impairment. At the end of 2016 Boskalis was net debt-free with a positive net cash position of EUR 203 million.
The order book increased to EUR 2.92 billion (end-2015: EUR 2.49 billion).
Peter Berdowski, CEO of Boskalis:
“After the best two years in Boskalis’ history, we found ourselves over the course of 2016 increasingly faced with the reality of the current market conditions, particularly in the offshore market. In that sense 2016 was a year of extreme transition for us, from economic high tide to low tide. The analyses carried out for our new business plan point out that a rapid recovery in the offshore market is not expected. And so where necessary we are adapting the organization to this new reality with further improvements in efficiency and effectiveness.
But we are also expressly looking at opportunities that a market such as this can offer us for strengthening the company for the medium term, when the offshore market will start picking up again. And so the period ahead presents us with a fascinating, challenging mix of sharpening up and expansion.
A challenge that we are excellently placed for given our financial strength, experience and vigor.”
The long-term megatrends that underpin the Boskalis business model remain positive. These business drivers are structural growth and rising prosperity of the global population, which in turn drives growth in global trade and demand for raw materials and energy. Global warming also continues to create business opportunities for Boskalis, with a growing need for coastal defense and riverbank protection in response to increased flooding as a result of the more extreme weather conditions. While the long-term trends are positive, in the short term they are not converting into promising projects across the board. In some of the regions and markets where Boskalis is active demand is expected to develop less favorably in the coming years and the outlook is uncertain. Boskalis will continue to focus on market segments that demonstrate long-term structural growth as well as offering opportunities in the short term: Ports, Energy (oil, gas, wind and the dismantling of old offshore platforms) and Climate change-related projects (coastal defense and riverbank protection).
The new Corporate Business Plan 2017-2019 takes a detailed look at the development of our business drivers and how these translate into our end markets. Despite the short-term challenges Boskalis is positive about the chances and opportunities for the medium and long term. We see plenty of scope for further expansion of the business; opportunities at Dredging & Inland Infra, as well as Towage, but especially in the high-end segment of the Offshore Energy market. The current difficult circumstances in the offshore market also offer distinct opportunities. The new Business Plan is discussed in greater detail in the Annual Report 2016 that is published later today, Wednesday 8 March.
The market picture for the year ahead 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 for the short term. For Boskalis the emphasis lies 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 occupied for 2017, albeit at lower margins than in previous years. The outlook for 2017 is less favorable at Offshore Energy. Following the conclusion of a number of long-term contracts from previous years and the completion of several large offshore wind farm projects revenue will decline and be more dependent on the spot market (services), where margins remain under continued pressure. The last of the Towage activities were transferred to joint ventures in 2016. Market volumes are relatively stable here, but even so there is increased pressure as well, especially for terminal services.
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