Rotterdam, the Netherlands, 15 March 2016
- Record-breaking revenue of EUR 2.58 billion (+23%)
- Record-breaking profit of EUR 169 million (+42%)
- EBITDA EUR 406 million (+30%)
- Net debt sharply reduced
- Offshore wind a solid foundation alongside dredging and offshore oil & gas
- Order portfolio at EUR 2.35 billion (-27%)
- Market conditions more difficult
- Low oil price puts pressure on margins in offshore oil & gas
Revenue and profit
The year 2015 was an extraordinarily good one for Van Oord. The company achieved a record revenue of EUR 2.579 billion (2014: EUR 2.104 billion), an increase of 23%, and a record profit of EUR 169 million (2014: EUR 119 million). These figures are attributable to the successful execution of several major projects, including construction of the Second Suez Canal, completion of Luchterduinen offshore wind park, and fast-tracked execution of Gemini wind park. The order portfolio totalled EUR 2.349 billion at year-end 2015 (2014: EUR 3.222 billion), down 27% on 2014.
High level of activity but more difficult market conditions
2015 was a year of major projects that made a significant contribution to our revenue and profit growth. Although Van Oord closed 2015 on a high note, it was also a year of sharp contrasts. Some worrisome economic trends have emerged, but also opportunities. With the low oil price causing capital expenditure to decrease in the oil and gas sector, our oil and gas activities have faced challenging circumstances.
Our Oil & Gas and Wind business units had fewer new projects than we had originally expected. The market for dredging projects was also negatively affected by the low oil price. As a result, our order portfolio fell by approximately one billion euros compared with 2014 to EUR 2.349 billion. On the other hand, the problems arising from climate change are creating opportunities for our Offshore Wind Projects business unit.
In 2015, Van Oord executed a variety of major dredging projects. One of the most important was the Second Suez Canal. Pieter van Oord, CEO: ‘Van Oord was part of a four-party consortium that successfully constructed this new 35-kilometre bypass within an extremely tight deadline of ten months. More than 25 vessels dredged well over 200 million cubic metres of sand in record time. On some days, we produced more than one million cubic metres.’
Major works still in execution are the Prorva project in Kazakhstan and the land reclamation project for the KNPC refinery in Kuwait. Fleet capacity utilisation was good in 2015. At 37 weeks, capacity utilisation of our trailing suction hopper dredgers exceeded 2014 by an average of four weeks. Compared with 35 weeks in 2014, our cutter suction dredgers were active 39 weeks – a new record.
Offshore oil & gas
Van Oord executed a large number of integrated projects in 2015 involving the construction, maintenance, replacement and protection of underwater pipelines. For example, Shell Gabon contracted the company to replace a ten kilometre-long oil export pipeline, and in Tetney in the UK a new pipeline was laid for Philips connecting the Humber oil refinery in North Lincolnshire to a Single Point Mooring in the North Sea. At 38 weeks on average, the capacity utilisation level of our fallpipe vessels was high. The falling price of oil led oil companies to prune investments in new fields, resulting in considerable market decline and pressure on prices. These economic trends had an impact on the order portfolio for the Offshore business unit.
The year 2015 was an extraordinary one for our wind division. September saw the successful start of the Luchterduinen project for our clients Eneco and Mitsubishi Corporation. This was the first project for our new installation vessel Aeolus. The installation of both the monopiles and the wind turbines went well. The Gemini project went exceedingly well in 2015. All the mono-piles were installed, as was much of the electrical infrastructure, including two Offshore High Voltage Stations. This was the very first project for our new cable-laying vessel Nexus, and its performance was excellent.
Pieter van Oord: ‘2015 was a busy year for the Offshore Wind Projects business unit, with activities for major projects such as Luchterduinen and Gemini reaching their peak. The Aeolus and the Nexus, our new vessels, performed very well. The market for large-scale offshore wind parks is growing rapidly. Offshore Wind Projects is a relatively new business unit and Van Oord has invested a considerable amount of capital in it in recent years. We often act as EPC contractor for offshore wind park projects. In other words, we assume responsibility for the engineering, procurement and construction of the wind park. In some cases, for example the construction of the Gemini wind park, we are also one of the shareholders.’
Denmark’s DONG Energy awarded Van Oord two contracts for offshore wind projects in 2015. In June, we received the contract to install the wind turbine foundations for the UK’s Burbo Bank Extension wind park. In October, we agreed to install and transport 87 foundations for the UK’s Walney Extension offshore wind park, again under contract to DONG Energy.
Successful integration of acquisitions
The businesses Van Oord acquired in 2014 were successfully integrated over the past year. Van Oord succeeded in acquiring three contracts for heavy lift vessel Svanen, part of the former Ballast Nedam Offshore division. Execution will take place in 2016 and 2017. Thanks in part to its cooperation with Van Oord, 2015 was a record year for J.T. Mackley & Co. Ltd., which we took over in 2014.
Safety and sustainability
Safety at work is a priority for Van Oord. It is a responsibility that extends across the entire chain of operations. In 2015, we kicked off our new SAY YES to Safety programme, which emphasises safety awareness and behaviour. The number of accidents resulting in absence from work has been decreasing steadily since 2007, and the safety targets are tightened up every year. The LTIFR (lost-time injury frequency rate – the number of accidents resulting in the absence of more than one day per 200,000 hours worked) dropped from 0.40 in 2014 to 0.22 in 2015. Safety awareness at Van Oord goes beyond mere compliance with the rules. Safety is already a factor in vessel design, but we also take safety into account by carrying out timely maintenance on our vessels and by preparing and managing projects properly.
Within the context of sustainability, Van Oord worked with research institutes and universities in 2015 to continue developing such innovations as FaunaGuard, ReefGuard, PlumeGuard, Ecodesign and OpenEarth. We actively offer clients these innovations in our tenders and projects. In 2015, the FaunaGuard – a system that uses underwater acoustic signals to temporarily stop marine mammals and fish from entering into a construction zone – was used successfully on the Luchterduinen and Gemini offshore wind projects.
Capital expenditure amounted to EUR 207 million in 2015 (2014: EUR 236 million). Key investments were the new fallpipe vessel Bravenes for our offshore division, which will enter service in 2017, and two new trailing suction hopper dredgers (with a hopper capacity of 18,000 cubic metres), Vox Amalia and Vox Alexia, to be delivered in 2017. We also invested in two small cutter suction dredgers in 2015, Ural River and Mangystau.
Financing and shareholdings
The company is financially sound. Thanks to the positive trend in operational cash flows, there was a substantial decrease in our net debt position (EUR 68 million) in 2015. The ownership structure remained unaltered in 2015. Van Oord nv is a public limited company with its head office in the Netherlands. MerweOord B.V., the Van Oord family’s holding company, owns 78.5% of its shares. The remaining shares are held by Cobepa (Nederland) N.V. (10.75%) and ConsOord B.V. (10.75%).
Van Oord’s strategy is based on three foundations: dredging, offshore oil and gas, and offshore wind. Offshore wind has developed into a solid third foundation in recent years. The markets in which Van Oord is active are all cyclical in nature, some more than others. We have also noticed, however, that cycles do not run parallel and can more or less neutralize each other. That has led us to conclude that our strategic choices, based on our three foundations, will ultimately be conducive to the stable growth of Van Oord.
Pieter van Oord: ‘We’re happy with this strategy because it makes the business less vulnerable in highly volatile markets. The transformation from a dredging company into a multifaceted marine contractor has significantly changed our activities and the composition of our fleet in recent years.’
Conditions in our markets will be challenging in 2016. The low prices of oil, iron ore, coal, copper and other commodities, and the economic and political problems in emerging countries like Brazil, China, and Russia will lead to a lower market volume and pressure on prices. The market for oil and gas, in particular, worsened rapidly in the past year and is not expected to improve in 2016.
The market conditions in the wind industry depend on the political support of governments in northwest Europe. The main ‘driver’ here is the problem of climate change and the correspondingly larger role being played by renewable energy. Concern about global warming, recently confirmed by the climate agreements in Paris, and the long-term aim of reducing our consumption of fossil fuels are leading to an increase in the use of wind energy, specifically in northwest Europe. With the price of electricity determined by subsidies, the wind energy sector depends on political decision making and therefore remains a high-risk proposition. We still believe that it offers many opportunities, however.
Pieter van Oord: ‘We operate in volatile markets. We expect market conditions to remain difficult in the coming years. Low oil prices and slower growth in markets that are important for us have put pressure on prices and reduced market volume. We are optimistic about the wind market for the next few years. We are confident about the future, thanks to the company’s strong financial position.’
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Robert de Bruin
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