Modest half-year profit - sharpening organization proceeding rapidly
Dredging contractor Royal Boskalis Westminster nv announced today that, in line with expectations, it has made a modest net profit of 7.4 million. Boskalis is making rapid progress with the organizational adjustments announced in March of this year. The measures primarily involve sharper purchasing, the rationalization of equipment and the organization, as well as better portfolio management, of the home markets. They involve approximately 450 jobs worldwide. The first phase has now been completed. The reorganization expenses have led to an additional pressure of 10.7 million before taxation on the results for the first half year.
Rob van Gelder, Boskalis CEO:
The results over the last six months are, as we expected, modest. However, we have maintained our good market position and that is important in the present circumstances.
I am satisfied with the rapid progress of the organizational adjustments, which is crucial in the fight for market position.
Boskalis made a net profit of 7.4 million in the first half of 2004. Turnover was 412 million and new orders were acquired amounting to 426 million, keeping the orderbook stable at 1.1 billion. The operational results were under pressure and fleet utilization was moderate. The net investments in equipment amounted to 66 million and the financial position remained sound with solvency at 42%.
Turnover and orderbook
Turnover was 412 million in the first half year, compared to 486 million in the first six months of 2003. Turnover fell both inside and outside Europe, with the exception of the Middle East.
In the home markets, turnover was 183 million, compared to 297 million, in the first half of 2003, when work was still in progress on two large assignments in Nigeria and Sweden. Market demand and turnover were both down on last year in all home markets.
On the international projects market, turnover rose to 207 million (first half 2003: 148 million), mainly because of a larger contribution to turnover from Archirodon in the Middle East. The share in turnover of Archirodon increased from 21 million to 57 million. The positive development of the activities and results of this company, which is included in consolidation on a proportional basis, has continued over the past six months.
In the specialist niche markets, less work was conducted for the offshore industry. Turnover was 22 million (first half 2003: 41 million).
The amount of orders acquired in the first six months of 2004 was 426 million (first half 2003: 511 million), with a considerable proportion coming from the Middle East. The orderbook remained stable at 1,138 million (year-end 2003: 1,124 million). Here, it is assumed that there will be no turnover in the second half of the year from the stagnating land reclamation work in Singapore. This work accounts for 340 million in the orderbook (year-end 2003: 361 million). The share in the orderbook accounted for by Archirodon increased from 182 million at year-end 2003 to 214 million.
Results
Earnings before interest, taxes, depreciation and amortization (EBITDA) were 54.3 million (first half 2003: 74.1 million). Due to lower turnover and fleet utilization, pressure on margins and reorganization costs of 10.7 million, the operating result fell to 7.9 million (first half 2003: 38.9 million).
The fall in market demand meant that utilization of the equipment was moderate in the first half of 2004. The lower utilization of the large trailing suction hopper dredgers, in particular, meant that the average utilization of the hopper fleet fell to 29 weeks on an annual basis (first half 2003: 35 weeks). On the other hand, utilization of the cutter fleet was better, particularly as result of the deployment of the larger cutter-suction dredgers on a few large projects: 31 weeks on an annual basis, as compared to 23 weeks in the first half of 2003.
Depreciation increased to 44.7 million (first half 2003: 30.4 million). This increase was primarily caused by the deployment of new equipment and the downward revaluation of equipment in Scandinavia and Portugal, where there was a rearrangement of activity portfolios. In addition, depreciation for Archirodon increased as result of investments in non-dredging equipment.
The result from non-consolidated participating interests fell to 1.7 million (first half 2003: 4.8 million). The largest associated company, Lamnalco, which is mainly involved in port and offshore services in the Middle East and Nigeria, once again made a major contribution to this result. However, moderate utilization of equipment in the United States and the offshore markets led to negative results in a number of equipment subsidiaries. This meant that, on balance, the result from participating interests was down.
Investments and balance sheet
The net investments in the first half year amounted to 66 million, mainly for the construction of the two trailing suction hopper dredgers of 16,000 m3 each. The two ships, which have been completed, constitute the completion of the fleet innovation and expansion program for 1997-2004. As far as older fleet units are concerned, two ships have been decommissioned and a third ship has been sold.
Cash flow in the first half year amounted to 52.1 million (first half 2003: 63.1 million).
Working capital remained very negative: 176 million as at balance sheet date. One of the reasons for the increase of 48 million for this item compared to year-end 2003 was the payment of creditors and taxes.
Provisions increased to 71 million (year-end 2003: 64 million). The principal components of this item are maintenance of equipment, deferred tax and reorganization expenses.
All capital expenditure was financed from company funds. The investments and the payment of cash dividend on the profit for 2003 were the main causes of the decrease on balance in cash to 94 million. A part of this cash, 52 million, was held by projects being executed in cooperation with third parties (year-end 2003: 61 million).
Equity to total assets as at 30 June 2004 was 42.3% (year-end 2003: 42.5%).
