Boskalis 2011-2013 Strategy: Optimize, Reinforce and Expand
Structural growth in the markets where Boskalis is active continues to be driven by long-term global economic and geographic trends. For the purpose of our new Business Plan we carried out a global review of the relevant trends and developments in our markets. We also visited dozens of clients and end-users around the world to sound them out about their vision on the market and their specific needs. This led to the following conclusions.
The most important underlying drivers of growth for the markets in which we operate are the growing demand for energy and growth in global trade.
Over the past few years we were faced with stagnating demand as a result of the cyclical downturn in 2008. At the same time we saw new production capacity coming onto the market. This put pressure on both volumes and margins. The market outlook for the longer term is more positive. Our analyses show favorable growth perspectives for the coming years in the markets related to Oil & Gas and Ports.
In addition in specific regions there is growing demand for land reclamation and coastal protection.
The main market segments we will continue to concentrate on are:
• Oil & Gas
• Land Reclamation & Coastal Protection
We see strong differences in client needs within and between the various market segments. At the lower end of the market we find clients who are looking for one fairly simple product, such as standard dredging work, equipment hire or transport. As these clients are strongly focused on costs, cost leadership is a major (pre)condition for success in this segment. Boskalis wants to be active in this segment with specific equipment because it allows us to realize stable volumes and optimize our fleet utilization.
At the top end of the market we find clients who look to us to deliver integrated services or turnkey solutions. To be able to meet these high-end client demands we need to operate as a contract partner, while additional competencies such as engineering, environmental and soil knowledge, expertise in coastal and maritime engineering and project management experience are key success factors.
We wish to position ourselves emphatically in this segment which is characterized by relatively low volumes and the potential for higher margins.
The group’s success is determined by its ability to leverage the diversity of our equipment to serve both these client groups in a balanced way.
• On market segments
• On geographic regions
• On Value-Adding Assets
The Focus principle relates to three aspects. In addition to the focus on our three market segments, we will especially target our activities on certain geographic regions. The choice for these regions is based on our market analysis which shows where the main Oil & Gas developments are likely to take place in the coming period and where the opportunities lie for our combined activities.
In the next few years we will concentrate our activities on six geographic regions, without however losing sight of other areas:
1. North-West Europe
2. South and West Africa
4. Middle East
5. Southeast Asia
Finally, we will focus on Value-Adding Assets through a combination of activities and equipment which enables us both to operate cost-effectively at the lower end of the market and to be successful in the complex turnkey/multidisciplinary integrated projects at the top end of the market.
• Cost leadership
• Further integration of activities
• Invest in developing competencies
With the new composition of the group and the focus areas we have defined we plan to optimize the cohesion between the various activities. On the cost side we will do this by making better use of the potential of our organizations and by investing in developing the competencies which strengthen our position as a high-end contractor.
1. Cost leadership – We want to strengthen our cost leadership by taking maximum advantage of the group’s economies of scale, for example by leveraging our purchasing power with suppliers. We want to reduce costs through benchmarking and exchanging best practices.
Moreover, we will set priorities within the business, prioritizing activities and assets with value-added contracting potential and focusing on the six geographic regions.
2. Integration & centralization of resources – We are working on enhancing the organization’s efficiency by further integrating various support activities and physically housing them under the same roof. The principal internal synergy opportunities lie in central management of the equipment (fleet management), purchasing, crewing and training. Furthermore, by acting in concert in the market we will be able to take advantage of new commercial opportunities that arise, with both new and existing clients.
3. Invest in developing competencies – In order to provide our joint activities in the higher segment we plan to combine and reinforce the necessary competencies – primarily engineering, costing, work preparation, risk management, project management and innovation. In the past few years Boskalis has strongly developed these competencies with regard to large, complex dredging projects. We want to further develop this knowledge and expertise and use it to scale up the group’s other activities towards turnkey projects. For example, we see opportunities in the market for providing complex oil and gas dredging work combined with SMIT activities.
• Invest in the dredging fleet
• Invest in other equipment
• Combine terminal services
We are going to reinforce our existing activities.
1. Invest in the dredging fleet – over the past few years Boskalis has had various ‘winning vessels’ built in the medium, large and jumbo hopper segments. We see ample opportunities for further selective investment in the market for dredging activities, particularly in the largest and smallest segments of the fleet. At the top end we want to recommission the mega hopper the W.D. Fairway. In addition we plan to have three competitive, smaller hoppers built.
Given that a few of our jumbo cutters are ageing, we also plan to invest in this segment over the next three years. In 2011 the selfpropelled cutter Taurus II will be upgraded to a mega cutter. This investment will considerably increase the vessel’s total installed power and discharge pump power capacity with 60% to respectively 24,600 kW and 16,000 kW and extend its lifespan. We will also replace one of the elder jumbocutters by a new self-propelled cutter. This state of the art megacutter will get a total installed power and discharge pump power capacity of respectively about 24,000 kW and 16,000 kW.
Subject to the resumption of large-scale land reclamation projects in Singapore, we plan to invest in several self-propelled mega sand carriers; this will involve single-hull tankers being converted to enable them to transport large quantities of sand over long distances at a competitive cost.
2. Invest in other equipment – In response to developments we are seeing in the energy market (both in Oil & Gas and offshore wind parks), we are investing in a fallpipe vessel and a hybrid rock dumping/cable laying vessel. The fallpipe vessel is currently under construction and will be commissioned in early 2012.
With the completion of new LNG import and export terminals we expect to see a considerable number of new terminal contracts from 2012/2013. We plan to build new tugs to service new terminal contracts.
For our Asian Lift Singapore joint venture we want to have a large floating crane built which can be deployed for heavy lifting work in for example the oil and gas sector in the Southeast Asia region.
We want to achieve further expansion in the Brazilian growth market by investing in new tugboats for our Harbour Towage and Terminal Services segments.
Furthermore, we are investing in high-pressure diving equipment (saturation diving) to enable us to extend our existing diving activities to other regions.
3. Reinforce Terminal Services – In 2011 we will further explore a possible merger of SMIT Terminals and Lamnalco, in which Boskalis intends to keep a 50% stake.
• Strengthen regional position
• Expand regional position
• Add global activities
1. Strengthen regional position using existing activities – We want to strengthen our position in the six geographic focus areas.
The leveraging of our market presence and strong client relationships will enable us to offer a wider range of activities. For example, our dredging activities hold a strong position in Australia and we see opportunities to also offer Terminal Services and Heavy Lift services in this market. In Brazil, where we are well positioned with Harbour Towage, we also see good opportunities for our Dredging, Transport and Heavy Lift activities. In West Africa, where we have successfully been providing
Dredging and Terminal Services for many decades, we see opportunities for growth in Transport and Heavy Lift. By using an existing market position to pass the ball from one activity to another, we see opportunities for strengthening our regional positions.
2. Expand regional position with new or related activities – As well as strengthening our regional position using our existing activities, we also see opportunities for starting up new, related activities. This demand for new activities stems primarily from developments in the energy market (both Oil & Gas and offshore wind parks) and the integration of the electricity and gas markets.
For example, we want to be involved in the realization of cabling infrastructures and the dismantling of oil platforms. Furthermore, in large-scale projects we want to be able to play a part in creating civil engineering constructions. We already provide these activities on a regional scale in the Middle East, where our associate company
Archirodon is very successful in these areas. Given their complementarity with the dredging activities we see further opportunities for expanding these activities to North-West
Europe and, selectively, to other regions as well.
3. Add global activities – In addition to strengthening our combined activities at a regional level through organic growth and/ or acquisitions, we keep an eye out for acquisitions which provide a global niche position, on condition that they are a good fit with the rest of the group in terms of activities, field of operation and core competencies.
New activities have to be related, and must have the potential to contribute Value-Adding Assets and thus leverage the group’s competencies.
Furthermore, we are open to any consolidation opportunities in the markets for Dredging, Harbour Towage and Terminal Services.
Boskalis is embarking on the 2011-2013 Business Plan with a sound balance sheet and healthy cash flow. This basis gives us sufficient scope for investment to renew and expand parts of the fleet with a total investment program of around € 1 billion.
The strategic framework for our Business Plan is based on current expectations with regard to global developments in the market segments relevant to us. Within this framework we believe in 2013 we should be able to match the historic annual result achieved in 2010.
Source: boskalis, April 5, 2011;