• The first half of 2020 for Royal IHC was dominated by refinancing and recapitalisation, and a transition to new shareholders.
• The COVID-19 pandemic had a major impact on order intakes throughout 2020 and the possibilities of working safely worldwide.
• Royal IHC achieved a negative EBITDA of EUR 199 million in 2020 as expected.
• This loss includes large one-off items, such as the (consultant) costs associated with the refinancing, a reorganisation provision and the costs of several complex shipbuilding projects from the past.
• As part of the rescue operation, EUR 200 million of IHC's debts will be converted into equity in 2021.
• In the second half of 2020, a reorganisation plan to restore profitability was drawn up and put into action.
• As a result, Royal IHC is expected to close 2021 with slightly positive results.
• This has been confirmed in the figures for the first quarter of 2021, concluded in accordance with budget.
A selection of figures for the years 2019 and 2020
(In EUR million)
|Order portfolio as at 31 December||450.5||689.8|
New strategyThe first half of 2020 was dominated by the refinancing and recapitalisation of Royal IHC. A strategy was also drawn up to focus the company on its core activities and bring the size of the organisation in line with a more realistic revenue expectation. The implementation of the transition plans and the strengthening of Royal IHC's position in the maritime sector followed in the second half of 2020.
Realistic sizeAfter determining the core activities, a start was made on selling or discontinuing the non-core activities. In addition, the organisation has become more efficient. The resultant downsizing measures aim to bring Royal IHC in line with realistic revenue expectations in terms of its size. This means that there has been a reduction of 300 jobs in The Netherlands and 300 jobs abroad. In addition, there has also been a reduction of 700 temporary workers.
Consequences of COVID-19The COVID-19 pandemic has been a dominant factor throughout the year for both order intakes and the ability to operate safely worldwide. Thanks to a clear crisis approach, the number of infections within production was limited, but Royal IHC regrets the loss of a colleague and a limited number of other colleagues were ill for a long time with COVID-19.
Royal IHC on trackGerben Eggink, Royal IHC CEO, says: “Royal IHC is now on track after a challenging 2020. There is maximum focus this year on successfully completing a number of large and complex projects that were contracted in 2017 and 2018.
“Although the consequences of the COVID-19 pandemic will have an impact on the 2021 results, we still expect a positive result. The prospects for the years that follow are also hopeful. There are clear signs of recovery in certain markets, and that will lead to new applications for the construction of ships and equipment in 2021 and beyond.”
Various market developments:
Custom dredgersThe market's initial response to the COVID-19 pandemic was to delay any investments. In the second half of 2020, the recovery started to become visible. The number of applications and concrete negotiations indicate a slow but steady recovery in the dredging market. The increased demand for custom dredgers is an indication of this trend.
Standard modular dredgersDespite postponed investments due to the COVID-19 pandemic, a positive result (at the level of 2018) was noticeable in the second half of 2020. Due to the short lead times around the purchase and a worldwide sales market, the COVID-19 effect will lag behind in 2021 with a lower expected turnover than 2020. Due to the restructuring of the organisation and the necessary changes to improve efficiency, this business unit will again see a positive result for 2021.
Offshore energy: oil and gasIn the offshore energy market for oil and gas, the negative effect of COVID-19, in combination with a very low oil price in the first half of 2020, has been enormous. Investments in capital-intensive oil and gas projects were postponed or even stopped altogether. Demand for services and refurbishments from Royal IHC remained stable, albeit at a lower level. This has led to new service contracts for pipelay vessels, refurbishment orders, a range of tandem mooring and offloading systems, and riser pull-in systems.
RenewablesThe offshore renewable energy market continued to grow in 2020. This resulted (also for IHC IQIP) in a higher turnover and order intake compared to 2019.
MiningThe effect of the pandemic was also noticeable in the mining market, especially with regard to large capital-intensive investments. Despite the decline in the number of smaller orders, 2020 was ultimately a good year for the Royal IHC mining cluster. Two customised dredgers and a multi-year maintenance and service contract were realised. At the end of 2020, it became clear that demand in this market will increase due to shortages in raw materials.
DefenceIn 2020 Royal IHC started to expand its activities in the global defence market. For example, contacts have been strengthened with the Dutch Ministry of Defence. This initially led to a number of engineering assignments.
Royal IHC is now a member of the ‘HR ecosystem’ and a partner in the Maritime Capacity Alliance. This is aimed at the exchange of knowledge and innovations, and in cooperation with the Ministry of Defence in the context of the adaptive armed forces. Royal IHC also intensified its cooperation with NAVAL Group to qualify for the Walrus replacement programme.
Royal IHC expects a worldwide increase of investment in defence equipment in the near future. In The Netherlands, this could lead to extra expenditure for, among other things, the replacement and renewal of part of the naval fleet.
Services and partsRoyal IHC's business activities surrounding the provision of services, equipment and parts remained relatively stable in 2020. This included maintenance and the improvement or renewal of installations and components. The minimum expectation is that this will also apply to 2021 across all markets in which Royal IHC is active.
Looking forwardIn 2021, a number of challenging ongoing projects will have an impact on Royal IHC's results. It is expected that these projects will be completed in 2021. With a slow but steady recovery in the various markets and a reduction in costs – as well as a clear focus on the company’s core activities – it is expected that there will be a slightly positive result in 2021.
This year, Royal IHC will also make its new positioning visible within each market. This makes it clear that a partnership with Royal IHC leads to the most efficient and sustainable products and solutions. For this reason – despite the current challenges – and in close cooperation with its customers, the company continues to invest in innovation. Royal IHC is therefore convinced that it can continue to make a leading contribution to the future of the maritime world.