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Boskalis enjoys good Q3, but orderbook declines

Boskalis enjoys good Q3, but orderbook declines
Royal Boskalis Westminster (Boskalis) realised a good third quarter, but its orderbook declined on completion of the Suez Canal expansion project.

Quarterly revenue slightly exceeded the average quarterly revenue in the first half of the year. Cumulative revenue for the past three quarters was stable compared to the same period last year when adjusted for (de)consolidation and currency effects, the company said in a statement. However, its orderbook declined 6.1% to $3.01bn.

In line with expectations, operating profit for the third quarter was lower than the exceptionally high average quarterly result achieved in the first half of the year, which was characterised by a high fleet utilisation and exceptionally good project margins. Operating profit was also lower than the level achieved in the third quarter of last year which was positively impacted by substantial settlement results on old Dredging projects. Net profit outlook for 2015 maintained although net profit lower than in 2014, $527M (EUR 490M).

Market conditions remain challenging, particularly in the capacity-driven segments in the Offshore Energy market, resulting in pressure on work volumes and pricing. The order book declined 6% compared to mid-2015 to $3.01bn. An important part of this decline was due to the conclusion of the sizable Suez Canal project.

“The outlook for the remainder of the year is unchanged and the full-year net profit forecast has therefore been maintained. Boskalis expects 2015 to be another good year, with a full-year net profit, including our stake in the result of joint ventures and associated companies, below the record level realised in 2014,” said the statement.

In Dredging the third quarter was again good after an exceptionally strong first half of the year. The revenue was at a high level as a result of a strong hopper fleet utilization that even exceeded the level achieved in the first half of the year, with the large trailing suction hopper dredgers nearly fully utilised. After a fully utilised cutter fleet in the first half of the year, part of the fleet was idle for scheduled maintenance.

The results and margins of ongoing projects were good across the board. In the third quarter projects were taken on in the Netherlands (Marker Wadden, Markermeerdijken, IJmuiden sea lock), the Middle East and Central and South America, among other places. Due in part to the completion of the Suez Canal project the orderbook fell around 3% compared to mid-2015.

Offshore energy had a good third quarter, although in line with expectations it was weaker than the strong first half of the year. This segment posted lower revenue and results compared to the past few quarters, partly due to a lower utilization of heavy transport vessels.

In marine services the wet towage activities of Fairmount and the short-term heavy marine transport activities of Dockwise were under pressure in the third quarter. In subsea services market conditions on the North Sea are still extremely competitive, and utilisation and rates remain under pressure as a result of the low price of oil. The orderbook for the offshore energy business was around 9% lower compared to mid-2015.

In the towage & salvage segment the level of activity of the European harbour towage services was stable compared to the first half of the year. SMIT Salvage had a busy third quarter with both wreck removal projects and emergency response activities. The picture at its towage joint ventures (Keppel Smit Towage, Smit Lamnalco and SAAM SMIT Towage) did not fundamentally change in the third quarter compared to the first half of the year. The orderbook of the segment is limited to the wreck removal projects of salvage and remained virtually unchanged compared to mid-2015.

In mid-December 2014 a Memorandum of Understanding (MoU) was signed with KOTUG International B.V. (KOTUG) to continue the European harbour towage activities in a 50 - 50 joint venture. This transaction is expected to be formalised at the end of the year, with the financial close taking place in the first quarter of 2016. 

Boskalis' financial position remains strong. The net debt position has further dropped since mid-2015 and Boskalis is operating well within the covenants which the company has agreed with its debt providers. “At the presentation of our first half-year results we indicated that utilisation and operating margins would be lower in the second half of the year after an exceptionally busy first half of the year. The picture in the third quarter is in line with this expectation,” the company said.

The expectation for net profit is therefore being maintained, with full-year net profit, including our stake in the result of joint ventures and associated companies, coming in below the record result realised in 2014.