The operating result (EBIT) increased by 8% to EUR 162.9 million (first half of 2010: EUR 150.8 million). In comparison with the first half of 2010, the impact of the acquisition of SMIT, effective from 1 April 2010, should be taken into account. SMIT’s operating result was fully consolidated in the first half of 2011, whilst in 2010 it was only consolidated for the second quarter.
The dredging activities saw a decline in the market, with fleet utilisation levels under pressure on the one hand but margins on current projects remaining at a very acceptable level on the other. Although on balance there was a slight decline in the result compared to last year, the dredging activities had a good first half. The contribution of Harbour Towage to the result, adjusted for the consolidation effect, was comparable to last year. The Transport & Heavy Lift activities saw a slight improvement thanks to the pick-up in North Sea spot contracts. However, there is no improvement as yet in the spot market in the Far East and Middle East. The utilisation rate of the floating sheerlegs was low during the first half of 2011. The contribution of Terminal Services to the result was down on last year, partly due to the temporary underutilisation of some tugs as a result of continued weakness in the spot market. Conversely, the Salvage activities had a good first half, with plenty of work in India and Southeast Asia.
At the end of the first half year Boskalis reached an agreement regarding the sale of SMIT’s terminal and AHTS transport activities to Lamnalco. Lamnalco, which is 50% owned by Boskalis, will pay a consideration of around USD 450 million for these activities. The sale of the SMIT activities is not expected to have a material effect on the Boskalis income statement for 2011.
“Looking back on the first half and given the challenging market conditions, we are positive about the result. For the first time in years we saw a sharp decline in the utilization of in particular the larger dredging vessels due to the lower volumes of work in the market and our selective contracting policy. However, thanks to the quality of our order book the negative impact was limited,” said Peter Berdowski, CEO. “Our recently presented three-year corporate business plan defined the strategic framework for the further development of Boskalis. With the intended acquisition of MNO Vervat, the sale of SMIT Terminals to Lamnalco and the ongoing integration of SMIT we are taking major steps towards implementing this plan.
We view the tightend market conditions with lower volumes of work and increased competition as a transitional phase with better prospects for the medium term. Large-scale investment plans in the oil and gas industry as well as global port developments will have a positive impact on Boskalis. We do, however, expect that the recently exacerbated macroeconomic unrest will affect the timing of these investments and are factoring in the possibility that investment decisions in large-scale projects may slip into 2012 and 2013.”
Market developments
The markets in which Boskalis operates are driven by factors such as growth in world trade, energy consumption, the global population and the effects of climate change.
Over the past few years they have been faced with stagnating demand as a result of the cyclical downturn at the end of 2008. At the same time they have seen new production capacity coming onto the market in the past few years. This put pressure on both volumes and margins on new projects and in certain sections of the market. However, recent market studies confirmed yet again that structural growth factors for the medium term remain positive. In several regions of the world clients in various market segments are developing an abundance of new initiatives for new and in many cases large maritime infrastructure projects. This applies in particular to energy and commodity-related projects in South America, West Africa and Australia. The demand for this infrastructure will not be affected by the recent macro-economic unrest, but the possibility of some of these projects suffering delays cannot be ruled out. For the time being the expectation remains that these projects will come onto the market in the next two years.
The demand for harbour towage services is developing positively. Freight volumes are picking up after dropping off in 2009. The further growth of the terminal activities is connected to the completion of new oil and LNG import and export terminals which are expected to come on stream from 2012. Here, too, it cannot be ruled out that the recent turmoil will have a dampening effect on an otherwise positive trend. The development of the salvage market is difficult to predict, given the nature of the activities. Development at Transport & Heavy Lift is in particular dependent on an upturn in the spot markets, especially the offshore spot market, which is not expected to occur before 2012.
Outlook
The Board of Management expects that, barring unforeseen circumstances, the result for the second half of the 2011 financial year will come in line with the first half. Total capital expenditure in 2011 is expected to amount to EUR 300-325 million.
Boskalis has reached an agreement regarding the sale of SMIT’s terminal and AHTS transport activities to Lamnalco, which is 50% owned by Boskalis. Lamnalco will pay a consideration of around USD 450 million for these activities. Final execution of the transaction is expected to take place at the end of the third quarter of 2011.