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Dutch water engineering and offshore contractor Van Oord has seen a slump in revenues and profit in the year 2016, what the management called »challenging«. The short-term outlook is negative, too.

Last year, revenue decreased to 1.71 billion €, marking a significant reduction fr[ds_preview]om 2.58 billion € in 2015. Net profits went down from 169 million € to only 90 million €, the company reported today.

In dredging, revenue was 1,189 million € (2015: 1,622 million €): the downward trend being most obvious in Areas Europe and Middle East & West Asia (Suez Canal). »Deteriorated market conditions were tangible in the Offshore oil & gas division, with revenue standing at EUR 130 million, considerably lower than in 2015 (EUR 242 million)«, it was announced. Offshore Wind Projects generated EUR 394 million in revenue, compared with EUR 715 million in 2015. The decline mainly had to do with the Gemini project, which was in full swing in 2015 and was completed in 2016.

»After two years of explosive growth, 2016 was a year of dwindling revenue and declining profits. The downward trend has many different causes: the completion of major projects, the low oil price, slower growth in world trade and overcapacity of dredging and offshore equipment.«

CEO Pieter van Oord.

Notwithstanding the difficult market conditions, Van Oord managed to enlarge its order book from 2.35 billion € to 3.27 billion €. This growth is due largely to offshore wind projects, including Borssele III & IV (Netherlands), Norther (Belgium) and major dredging projects such as Marginal da Corimba project in Angola.

According to the statement, in 2016, new projects valued at EUR 2,635 million have been acquired, compared to EUR 1,706 million in 2015. »Because many of these new projects will be executed in 2018 or later, they will not contribute to our revenue in the short term. Our order portfolio is robust and stood at EUR 3,271 million at year-end (2015: EUR 2,349 million).«

Van Oord, Crane Vessel, LNG, Neptun Werkendam
A recently ordered newbuilding: The »Werkendam« is being built by Neptune in Hardinxveld-Giessendam. (Source: Van Oord)

Van Oord executed various dredging projects in 2016. In the Netherlands construction of the largest sea lock in the world, IJmuiden, started. Van Oord dredged the waterways for diverting shipping traffic. Furthermore 2016 was also the year in which Van Oord worked on the Prorva project in Kazakhstan. A new 68-kilometre-long access channel to the Tengiz oil and gas field will be completed mid-2017. In the port development segment, Van Oord deployed its jumbo hoppers on the Kaohsiung project in Taiwan, where it has begun reclaiming 250 hectares of land. Van Oord worked also on the project for APM Terminals to construct a new container terminal in Moín, Costa Rica.

Offshore markets

TheOffshore oil & gas division has been affected by the low price of oil, which has led clients to postpone or cancel investments. In 2016 Van Oord deployed the flexible fallpipe vessels on Subsea Rock Installation (SRI) projects for pipeline protection. Other works have been carried out in the United Kingdom, Egypt and Norway.

»The year 2016 was a special one for offshore wind«, it was added. The completion of the Gemini Offshore Wind Park in the autumn of 2016 was Van Oord’s biggest project ever.

»The year 2016 also saw a breakthrough in the costing of offshore wind projects. The price level that won Van Oord the Borssele III & IV tender (in a consortium with Eneco, Shell and Mitsubishi) set a new standard. Such low costs mean that offshore wind will form an increasingly important part of Northwest Europe’s low-carbon energy mix. We are proud to be playing a prominent role in making this happen.«

CEO Pieter van Oord.

The outlook comprises a dredging market which is »troubled by overcapacity and deferred project investments«. On the positive side, the market for offshore wind installations achieved a breakthrough in 2016, thanks in part to governments’ ambitious and detailed energy transition plans. »This led to a fierce reduction in the cost of offshore wind farm construction. Installations are also bigger and more powerful these days, and are increasingly being constructed in deeper waters, making heavy demands on their designers and builders. The offshore wind market has matured rapidly«, the company said, adding that the demand for all-round solutions continues to grow, with clients inviting tenders for Engineering, Procurement and Construction (EPC) contracts.

Negative Outlook

Althoug a considerable number of projects have been added to the portfolio in 2016, Van Oord does not expect to see any positive effects on the financial results until at least 2018, since most of these projects will be executed in 2018 and later.  »2017 will be a challenging year. The harsh market circumstances for dredging and Offshore oil & gas will continue to impact us. Van Oord is a robust company with an excellent financial position«, the CEO concluded.