Contractual issues in offshore projects cause drop in Boskalis’ 1H2019 EBITDA to €135.7 million

Royal Boskalis Westminster enjoyed earnings before income tax, depreciation, and amortisation (EBITDA) of €135.7 million (US$150 million) for the first half of the year 2019 compared to €167.2 million for 1H2018, a decrease of around 18 per cent.

The company said that a strong decline of the result was caused by operational and contractual issues on a limited number of offshore projects, partly in decommissioning but mostly in offshore wind cables.

In the offshore wind market, circumstances have changed as a consequence of the move to zero subsidies and increased competition. Boskalis comments this has resulted in a recent and unexpected change in the attitude of clients, which is reflected in a sharp increase in the number of disputes and protracted claim negotiations.

Following a thorough review of the projects in hand, provisions of slightly more than €100 million (US$110 million) have been made on a limited number of onerous contracts. The entire order book was reviewed when determining these provisions.

Boskalis said that it is confident that in time, a substantial part of these provisions will be recovered, though it has not taken this into consideration in the reported figures.

Within the dredging and inland infrastructure segment, revenue increased with the strongest growth realised outside Europe, particularly in Oman, Singapore, Canada, and the Indian subcontinent. The results were virtually stable compared to the same period last year.

Under offshore energy, revenue from contracting activities increased with important contributions from the cable laying activities and seabed intervention projects such as Nord Stream 2. Within the services cluster, the developments were in line with expectations.

The subsea and survey activities had a relatively busy first half year.

Within heavy marine transport, revenue decreased in part due to the decision taken last year to exit the low-end transport market. The sharp decline in the division result is fully explained by provisions for onerous contracts of more than €100 million.

Salvage had a very good first half year with high-profile and successful salvage operations. The contribution from the towage joint ventures decreased, which is entirely attributable to the intended sale of the company’s interest in Kotug Smit Towage and Saam Smit Towage.

The contribution from the remaining salvage and towage joint ventures was higher compared to the same period last year.