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Oil, Gas and Offshore Wind push Boskalis profits down

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Boskalis have reported that revenue in the first half of the year declined by 7% compared to the first half of last year to EUR 1.09 billion (H1 2016: EUR 1.17 billion). Adjusted for consolidation, deconsolidation and currency effects, revenue was down by 13%.

EBITDA in the first half of the year totaled EUR 225.1 million and the operating result was EUR 101.7 million (H1 2016 EBITDA: EUR 317.6 million, operating result: EUR 182.4 million).

Both revenue and fleet utilization increased at the Dredging & Inland Infra segment, with large projects in execution in Brazil, Indonesia and Oman contributing to the rise. The result was virtually stable with continued margin pressure.

At Offshore Energy revenue and result declined, due in part to poor market conditions in the oil and gas industry. In addition there are no major offshore wind farm projects in progress this year, whereas the construction of two sizable wind farms contributed to revenue and the result last year. The VBMS cable-laying activities had a good first half of the year, making a significant contribution to the division's results.

Revenue and results were also under pressure at Towage & Salvage, partly due to the deconsolidation of the European harbor towage services but also as a result of a very quiet first half of the year at Salvage. It was quiet globally, with a limited number of emergency response assignments. Furthermore there were no major wreck removal projects being executed.

Boskalis' financial position continues to be strong, with a solvency ratio of 62.6% and a positive net cash position of EUR 235 million.

The order book, excluding our share in the order book of joint ventures and associated companies, increased to EUR 3.246 billion at the end of the first half of the year (end-2016: EUR 2.924 billion).

Peter Berdowski, CEO of Boskalis:

"Developments in the first half of the year were in line with expectations. The results of the traditional dredging activities were stable with higher fleet utilization rates. The outlook is moderately positive given the volume of work in the market and an increase in the order book. As expected, the situation in the offshore market resulted in a further drop in the result. We do not foresee a quick recovery in the offshore market, as previously stated, and have adjusted our fleet and organization to this new reality.

The weak offshore market also presents clear opportunities for us to strengthen the company, as evidenced by the recently announced acquisition of Gardline. This acquisition will specifically help fulfill our strategic ambition to build a position in offshore survey. Gardline is a key player in the survey market with years of experience and a strong reputation. The acquisition will enable us to further position ourselves for opportunities in offshore wind energy, as well as to be well placed to take advantage of growth opportunities when the offshore market picks up again. In the coming period we will continue to look actively at opportunities to strengthen and expand the company in the medium term."

Market developments

The market developments as presented in the Corporate Business Plan 2017-2019 and discussed in greater detail in the Annual Report 2016 have not materially changed. In summary they are:

Lower result in line with expectations  

  • Revenue: EUR 1.09 billion
  • EBITDA: EUR 225.1 million
  • Net profit: EUR 75.1 million
  • Order book: EUR 3.25 billion

OUTLOOK for 2017

• Mixed market picture
• Dredging & Inland Infra: reasonable market volumes with further upward potential for utilization rates
• Offshore Energy: fewer contracting projects and continued friction between supply and demand in services
• Towage: relatively stable market volumes
• Profit outlook: net profit in the second half of the year comparable to the first half of the year, excluding restructuring charges

According to the report the long-term megatrends that underpin the Boskalis business model remain positive. Such business drivers are the structural growth and rising prosperity of the global population, which in turn drive growth in global trade and demand for raw materials and energy.
Global Warming Opportunity

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).

We see plenty of opportunities to expand the company further; opportunities at Dredging & Inland Infra and at Towage, but particularly in the high-end section of the Offshore Energy market where current market conditions also present clear opportunities.

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