Posted May 10, 2018
Developments at Royal Boskalis Westminster N.V. (Boskalis) in 2018 have so far proceeded in line with the market conditions as described during the 2017 annual results presentation.
• Revenue virtually unchanged compared to the first quarter of 2017. Continued pressure on margins, particularly at the services activities of Offshore Energy.
• Stable fleet utilization at Dredging and mixed picture at Offshore Energy.
• Further increase in order book.
During the presentation of the 2017 annual results Boskalis noted that the current market picture in the oil and gas-related segments in particular is characterized by lower volumes of work and as a result pressure on margins and utilization levels. The situation in the first quarter of 2018 was in line with this expectation. Compared to the same period last year revenue was virtually stable. Fleet utilization at Dredging was also stable, although utilization of the offshore fleet showed a mixed picture. The order book continued to increase in the course of the first quarter, due in part to the two sizable Dredging contracts won recently in Singapore.
Dredging & Inland Infra
Revenue at the Dredging & Inland Infra division rose compared to the first quarter of last year with a comparable result. Notable projects included Duqm (Oman), JNPT (India), Nordvikkudden (Sweden) and PCCP (Panama) along with various Room for the River projects in the Netherlands.
Given the circumstances, utilization of the hopper fleet was good and stable compared to the utilization rate in 2017 as a whole. The utilization rate of the cutter fleet in the first quarter was also good given the circumstances following a quiet 2017. The mega cutter suction dredger Helios, which was taken into service last year, made a good contribution on the Duqm project during the quarter under review.
The order book of the Dredging & Inland Infra division showed a further increase compared to the end of 2017. Notable new projects contracted include the expansion of the Singapore Tuas Mega Port, the development of a polder in the northeastern part of Singapore, the deepening of the Nieuwe Waterweg in the Port of Rotterdam and a maintenance contract for the UK Ministry of Defence. The recently announced EUR 85 million contract from the City of Amsterdam to construct an artificial island in the IJmeer lake is not included in the first quarter.
At Offshore Energy, in line with expectations, there was a decline in both revenue and the result in the first quarter. The decline was mainly related to the services activities, where volumes and margins have been under pressure for a considerable time. As stated previously, various options are being considered to further rationalize the services activities at the lower end of the market.
The contracting section of the division comprises Marine Installation, Seabed Intervention and the Subsea cable-laying activities. Notable projects executed included the Aberdeen, Galloper and Rampion offshore wind farms. Revenue was lower and fleet utilization slightly higher than in the same period last year.
The services section of the division comprises Marine Transport & Services, Subsea Services and Marine Survey. At Marine Transport a number of large transport contracts, including the Johan Sverdrup project, made a significant contribution to revenue. On balance revenue was lower, in line with expectations, and utilization rates were mediocre, in particular at the lower end of the transport fleet.
At Subsea Services the winter season on the North Sea is seasonally quieter. Revenue was comparable to the early part of last year with good utilization of the diving support vessels.
Marine Survey, comprising the Gardline activities acquired in the middle of last year, also tends to have a quiet period during the winter months. Nevertheless this early-cyclical activity is showing signs of recovery compared to recent years and the order book for 2018 is filling up.
The overall Offshore Energy order book was slightly lower than at the end of 2017.
Towage & Salvage
Salvage had a good start to the year. In addition to a number of smaller emergency response contracts revenue was lifted by the contract to salvage the ultra large container ship Maersk Honam, which caught fire in the Arabian Sea.
All Towage activities were transferred into regional joint ventures with effect from the second quarter of 2016. The results of these activities are only recognized as results from joint ventures and associates.
The margins at Towage are under pressure due to the limited volume of activities in the offshore oil and gas sector and the price pressure in container transport.
As stated in our 2017 annual results release the current market picture in the oil and gas-related segments in particular is characterized by lower volumes of work and the resulting pressure on both margins and utilization levels. There has been no material change in this picture since then, although the LNG-related activities and offshore oil activities in the Middle East are showing tentative signs of recovery.
The project-based nature of a significant part of our activities, in addition to the uncertain market conditions, makes it difficult to give a specific quantitative forecast with regard to the 2018 full-year result early on in the year. Based on today's knowledge it is not expected that the 2017 net result will be matched.
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. The net debt position increased in the first quarter, partly as a result of the share buy-back program, investments, the development of the result and the partly seasonal movements in working capital. Boskalis has a very sound financial position and comfortably meets its financial covenants.