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Boskalis meet expectations under difficult market

Boskalis meet expectations under difficult market
Royal Boskalis Westminster N.V. (Boskalis) posted a net profit of $166.27m in the first half of 2016 compared to $345.5m in the year-ago period, the company announced in a statement.

Revenue in the first half of the year fell 25% year-on-year to $1.32bn. Whereas the first half of 2015 was extremely busy, revenue declined in the first half of this year as a result of the deteriorated market conditions.

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 that made a substantial contribution last year. Furthermore, fleet utilisation was adversely affected by the suspension of work on the Pluit project in Indonesia. Results on projects in progress were reasonable to good, Boskalis said.

Offshore Energy managed to have a good first half of the year despite market conditions and the resulting lower revenue and fleet utilization. The EBIT and EBITDA margins were virtually stable compared to the same period last year.

At the start of April Boskalis' 50/50 joint venture with KOTUG aimed at combining the European harbour towage activities together was affected. Due in part to this, revenue in the Towage & Salvage segment declined in the first half of the year compared to 2015. Salvage had a busy start to the year with various emergency response assignments, but the result declined on balance due to the absence of larger wreck removal projects.

"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,” said Peter Berdowski, ceo Boskalis.

“We foresee that the current market environment may persist for several years. We have therefore taken the necessary steps to adjust the size and composition of the fleet to this new reality. As previously announced we will take 24 vessels out of service in the 2016-2018 period and consequently have to let go of a large number of employees. These are drastic measures that unfortunately need to be taken to ensure that Boskalis remains healthy going forward,” he added.

The general market outlook for the coming period is expected to continue to be characterised by lower volumes of work and pressure on utilization rates and margins. At Offshore Energy a number of long-term contracts and work already contracted provide stability for part of the fleet, but the spot market-related transport activities and subsea services are experiencing pressure on utilization rates and margins.

The offshore wind market presents new opportunities, partly through the recently acquired offshore activities of VolkerWessels. At Towage all activities have now been transferred to joint ventures. Market volumes in this segment are relatively stable, although competition is expected to increase further here, too, particularly in oil and gas-related services.

The fleet rationalisation programme will be implemented in the next two years. This will involve vessels being taken out of service and the loss of 650 jobs. It will also involve taking a critical look at reducing costs of the global office network.